Oversight of Long-Term Investment by Short-Lived Regulators

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Abstract
Certain regulators of economic activity, like utility regulators and government procurement officers, typically serve for relatively short periods of time. We consider how to best motivate long-term investment in the presence of short-lived regulators. A firm's investment decision is overseen by one regulator. Whether the investment is ultimately adopted is determined by a second, distinct regulator. Each regulator is concerned with the welfare of its own contemporary population. Transfer payments between populations are limited, and relevant data cannot be verified by third parties. Underadoption and underinvestment "on average" result, although overinvestment may also occur under the optimal regulatory charter.

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