The paper provides a tractable, analytical framework to study regulatory risk underoptimal incentive regulation. Regulatory risk is captured by uncertainty about thepolicy variables in the regulator’s objective function: weights attached to profits andcosts of public funds. Results are as...

We analyze the two goals behind the European Bologna Process of increasing student mobility: enabling graduates to develop multi-cultural skills and increasing the quality of universities. We isolate three effects: 1) a competition effect that raises quality; 2) a free rider effect that lowers...