Otherwise, this cannot be considered as sufficiency profitable for inducing unregulated organization for their provision within a specific community. Companies providing these types of services and goods are often provided with franchises and licenses for the prevention of competition. The authority of regulation allows organizations for setting prices beyond the average cost set within the protected market platform for coverage of losses within the community of target. In this specific manner, the business organizations are allowed for earning and indeed guaranteeing an overall return at reasonable rate.
Considering its criticism, there is mostly a contrasting of the public interest theory with public choice theory. The public choice theory can be considered as highly cynical related to the motives and behaviours of the government, while seeing regulation to have social inefficiency. In addition, as per Stigler, there can be capturing of regulation through incumbent organizations for protecting the market such that new competitors are not able to enter it. It is the belief of several critics that this will be taking place when the public ends up demand a better efficiency of allocations.
The economic interest group theory mentions that regulations are a combination of policies driven out of the forces of demand and supply. There is placement of the government on the side of supply while the interest groups are on the side of demand. The theory mentions that there is development of regulation through the industry, and that the key goal of regulations is for creating benefits to the concerning industry. The establishment of this theory took place in the year 1971 by the consideration of economic theory of regulation and Chicago theory of government. These regulations are also operated and there seems to be no involvement of external mechanisms. Under this claim, the government has been allowing the stakeholder groups of the industry for having key participation in the economic matters in concern with decision making that impact each and every sector of the economy.
The key suggestion of this theory is that the representative groups within the decision making of government have to be of small size for the reduction of running expenses. Further ahead, producers may consider the organization of themselves with more readiness in comparison with the consumers. The key notion is that producers can consider an easy regulation of activities faster in comparison with the key consumer. In addition, the phenomena of cross subsidization are in consideration within the theory.