Corruption and the case for safe-harbor regulation

We study whether the joint adoption of ex-ante regulation and ex-post liability leads to a higher level welfare in setting which firms invest resources develop an innovative product that can have negative social repercussions. allow for firm-regulator corruption compare two alternative regulatory regimes: lenient authorization strict authorization. Corruption favors strengthens case making immune from so as encourage investment. By contrast, when is adopted, should not be insulated liability. Hence, more severe less common.