Enforcing Time Inconsistent Government Regulations

Andrew N. Kleit
Working Paper:

Certain government regulations require a good deal of investment by firms before the regulations actually go into effect. In these cases, if a firm does not engage in the desired level of investment, it can be quite costly to society to actually enforce the regulation. This paper derives a game theoretic model of how such regulation could be enforced by examining the bureaucratic incentives of the various governmental parties involved in overseeing a regulatory program.