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We explore the separation of powers between the legislative and the executive branch of government as a way of overcoming
the dynamic consistency problem of regulatory policy towards investment. We model the industry as a regulated duopoly.
The incumbent is a vertically integrated firm that owns a wholesale unit and a retail unit. The entrant only owns a retail unit.
Either retail unit needs access to the input produced by the wholesale unit to operate. The regulator is unable to commit to a
policy and the legislator sets the regulator's objective function. We derive general conditions under which, having the
legislator distort the regulator's objective function away from social welfare, allows implementing socially desirable