We present a model in which setting up and running a regulatory institution takes a fixed cost. As a consequence, the supply of regulation is limited by the extent of the market. We test three implications of this model. First, jurisdictions with larger populations affected by a given regulation...

We present a model of efficient regulation along the lines of Demsetz (1967). In this model, setting up and running regulatory institutions takes a fixed cost, and therefore jurisdictions with larger populations affected by a given regulation are more likely to have them. Consistent with the...