According to economist George Stigler, the process of regulating firms with market power becomes suspect over time because
A) regulators shift from protecting the consumer to protecting the regulated firm from competition.
B) regulation leads to corruption of political parties.
C) regulated firms devise methods to circumvent the regulations.
D) regulators impose additional costs on regulated firms because they are expected to accomplish other social goals.
E) regulated firms are allowed to expand into other markets and drive out competing firms.

Question

Quizplus · Accepted Answer

Stigler argued that as regulators become more involved with regulating firms with market power, they may shift their focus from protecting consumers to protecting the regulated firms from competition. This can be due to a variety of factors, including the influence of the regulated firms on the regulatory process, the desire of regulators to maintain a cooperative relationship with the firms they regulate, and the regulatory capture of the regulatory agency by the firms it regulates. As a result, regulation can become suspect and lead to unintended consequences such as reduced competition, higher prices, and reduced innovation.

According to Economist George Stigler, the Process of Regulating Firms