Economic foundations of pro-competitive regulation: regime choice and error risks (evidence from airports)

Objective: to develop a theoretical and methodological approach to assessing the justification of pro-competitive economic regulation and to selecting its regulatory regime and instruments; to identify the risks arising when regulatory design is misaligned with the economic rationale for intervention, and to assess the relevance of these risks using the airport industry as a case study.

Methods: qualitative law-and-economics analysis. The study compares the economic rationales for regulation (natural monopoly, transaction costs, essential facilities, and platform economics) with the stated objectives and scope of intervention. The error-cost framework is used to derive criteria for choosing a regulatory regime and to develop a typology of risks, distinguishing Type I errors (unwarranted intervention) from Type II errors (non-intervention or insufficient intervention). The analysis draws on the airport economics literature and case studies of Russian enforcement practice in airport services market.

Results: the paper systematizes the economic rationales for pro-competitive regulation and shows how a chosen rationale determines the relevant scope of intervention and the range of price and non-price instruments. It proposes criteria for regulatory regime choice and a stepwise principle for tightening regulatory constraints. A typology of misalignment risks is developed for both rulemaking and enforcement stages, including the risk of extending a regulatory regime to competitive and potentially competitive market segments. On an example of airport industry, the paper demonstrates the channels through which these risks materialize and their consequences for efficiency-enhancing and investment incentives, as well as for the effectiveness of competition and industrial policy.

Scientific novelty: the study offers an approach to assessing the theoretical justification of pro-competitive economic regulation and a procedure for selecting a regulatory regime that reduces the likelihood of Type I and Type II errors. It develops a typology of risks stemming from the misalignment between regulatory design and the economic rationale for intervention and illustrates (on airport markets) the mechanism through which regulatory regimes may be extended to segments that would otherwise remain unregulated.

Practical significance: the results can be applied in competition policy, in designing differentiated regimes for tariff regulation and non-discriminatory access, and in assessing both the intended and actual effects of competition policy measures.

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