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Abstract This paper seeks to establish a dynamic model of governmental regulation in terms of supply and demand equilibrium. The model shows that the ultimate goal for governmental regulation is to realize the equilibrium between supply and demand. However, since the supply and demand relationship is also affected by a number of variables, especially the sensitivity and responsiveness to the changes in the boundary of natural monopoly, cost constraints and the competing tactics of different interest groups. Nevertheless, facts show that the ultimate goal is hard to attain and that the effectiveness of governmental regulation is always desired. The dynamics of the model indicates that changes in the variables that affect the supply and demand of governmental regulation will lead a state of balance to one of imbalance. In this context, governmental regulation needs to be relaxed or tightened in order to attain a new point of balance. And that the long-term force which decides institutional change
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Received: 19 February 2009
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Corresponding Authors:
ZHANG Hui-heng
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2009, Vol. 1 
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