Abstract
Peltzman (1976) formalizes the idea that a politically concerned regulator determines a regulated price in trying to maximize his or her political support. This paper develops a modified version of Peltzman's model incorporating the notion that the regulator's behavior changes with the proximity of elections. The addition of a time dimension to the model yields a political price cycle in regulated industries. The regulator has incentives to impose higher prices when elections are relatively far ahead and lower (real) prices in periods that immediately precede an important election. Econometric analysis indicates that during 1969–1982 the Brazilian gasoline market experienced such cycles.
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