An adversarial game is used to model the amount of influence a firm has over a government regulator, and its equilibrium level of regulation, as a function of firm fundamentals. The effective influence of a firm is identified as comprising both intrinsic and exerted components; where the latter involves distorting regulation via a transfer to...

International investment agreements in bilateral treaties or free trade agreements allow investors to bring compensation claims when their investments are hurt by new regulations addressing environmental or other social concerns. Compensation rules such as expropriation clauses in international treaties help solve post-investment moral hazard problems such as hold-ups, thereby helping to prevent inefficient over-regulation and...