Closing loopholes

Correcting perverse outcomes from regulatory decisions

When regulators set price controls, design markets and otherwise change the rules of the business game, most of the debate is about intentions - what should the rules achieve? However, the best intentions may be garbled in translation into regulation. Occasionally, apparently sensible rules create perverse incentives, or even loopholes that regulated companies can exploit at their customers' expense. Such unintended consequences need to be corrected quickly, before decisions take effect. When Frontier Economics alerted an airline client to just such a danger in the Irish aviation regulator's decision on airport charges, an appeal led quickly to a revised decision.

frontier bulletin - closing loopholes.pdf

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