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Economics of Regulation


Admission requirements

This course is for Master students Public Administration, track Economics and Governance only.


When will markets fail and what policy instruments can be used to correct these market failures? This is the central question in the course on the economics of regulation. Economists distinguish several potential causes of market failure: externalities, collective goods, imperfect competition, and information asymmetries. Market failures could be corrected for by government policy to improve the outcome of markets. The scope and effectiveness of government policy depends on the decision-making process of individuals.

This course first explains why the stated market failures may give rise to welfare losses. Subsequently, we focus on policy options to correct market failure, especially market failure caused by externalities. What type of regulation can be expected to be efficient, depending on the circumstances? For instance, in case of externalities, consumers or producers inflict harm on third parties. There are numerous policy instruments that can be used to correct for this potential harmful behaviour: liability rules, rule enforcement and taxes, etc. We will also discuss the use of the social cost-benefit analysis as a way to structure decision-making processes that intend to solve a market failure. We apply our insights to socially relevant topics such as environmental policy.

Course objectives

By the end of this course, students will be able to:

  • Identify whether potential causes of market failure are present in various cases.

  • Analyze the efficiency of different regulatory instruments that can correct market failure in various cases.

  • Critically assess the outcome of social cost-benefit analyses.


On the Public Administration front page of the Studyguide you will find links to the website and timetables, uSis and Brightspace.

Mode of instruction

The course consists of one general lectures and six interactive seminars, partly supplemented by recorded weblectures. Attendance is not compulsory, but the discussions during the lectures and seminars are valuable as exam preparation.

  • Total course load 140 hours

  • Hours spent on attending (web)lectures and seminars 16 hours

  • Time for studying compulsory literature and completing assignments 124 hours

Assessment method

The default assessment method under “normal circumstances ” is a written exam (100%) at the end of the course.

Students are expected to actively participate during the seminars. Students are asked to hand in weekly assignments before the start of the lecture or seminar. Every assignment handed in on time, and of sufficient content, yields a credit of 0.10 points on the final score, with a maximum of 0.5 credit points (so, 5 assignments handed in yields the maximum credit-point). The final grade is maximised at 10. The assignments contain exam material and can therefore be regarded as a good exam preparation.

To pass the course, the final grade of the exam (or written assessment) plus the credit points acquired on weekly assignments should be sufficient. There is no possibility to retake the weekly assignments, and the credit points are only valid in the current academic year.

Partial grades are only valid in the current academic year; partial grades will not remain valid after the exam and the resit of the course.

Reading list

To be announced, see Brightspace.


Register yourself via MyStudymap for each course, workgroup and exam (not all courses have workgroups and/or exams).
Do so on time, before the start of the course; some courses and workgroups have limited spaces. You can view your personal schedule in MyTimetable after logging in.

Registration for this course is possible from Wednesday 13 December 13.00h

Leiden University uses Brightspace as its online learning management system. After enrolment for the course in MyStudymap you will be automatically enrolled in the Brightspace environment of this course.

More information on registration via MyStudymap can be found on this page.

Please note: guest-/contract-/exchange students do not register via MyStudymap but via uSis.


Dr. J. Meekes
Dr. P.W. van Wijck