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Herding Towards a New Convention: on herds, shepherds and lost sheep in the liberalisation of the telecommunications and electricity industries

Dr David Levi-Faur
Centre on Regulation and Competition, University of Manchester and University of Oxford
Email: levi@poli.haifa.ac.il|

Date: 19 November 2002
Time: 1:00pm - 2:30pm
Venue
: CARR Seminar Room, H615

Abstract

While there is growing recognition of the role of emulation in the policy process in general and in policy transfer in particular there are only limited efforts to model it in a systematic way. This paper takes this challenge through a temporal analysis of the role of contagion in the diffusion of liberalisation across countries and sectors. In many political situations one's choice is determined not only by one's own preferences and information but largely by signals of others.

This paper suggests that this is the situation where many public officials found themselves when they had to consider the option of liberalising their country's infrastructure. It offers a formal model where one's preferences, strategies and payoffs are dependent on others and where political and policy outcomes are the result of imitation and contagious behaviour. The model aggregates three models that operate on different levels of analysis and rarely if at all are brought together. It rests first on herd models that were developed in the discipline of economics and supply micro-level analysis of the incentives for herding. Second, it rests on Granovetter's threshold model of captures the number or proportion of others that must make a decision before a given actor does so. Third, on diffusion models that were developed mostly by sociologists to capture macro-aspects of the spread of new technologies, information, drugs, fashions and the like. The model applies to any country that proceeded towards liberalisation after taking cues from all or some of the earliest cases of liberalisation. In doing so the model complements top-down and bottom-up explanations of the spread of liberalisation across the world.

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