This research studies the design of public institutions and the relationship between institutional characteristics and the public policies adopted by those institutions. The former focuses on the design of institutional arrangements, such as the price-cap systems and the privatization arrangements being used by various countries in telecommunications, taking into account both economic and political incentives. The approach treats the ability of governments to commit to a long-run incentive system as endogenous and depending on the political action of interest groups as triggered by information released over time through the performance of the incentive system. For parliamentary systems, the objective is to develop a theory in which political parties, coalition governments, and policy formation are endogenous functions of electoral and legislative institutions. For the U.S., parties are perhaps less important than in parliamentary systems, and interest groups interact more with individual legislators than with parties. In the U.S. context, the objective is to investigate the role of interest groups in influencing policies through lobbying and election finance. The overall objective of this research program is to provide a political economy theory of the public control of firms and markets as a function of the structure of the political system. The research will have a significant impact on our understanding of regulation, political institutions such as electoral laws and parliamentary governments, interest group activity, and electoral competition.
