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The equilibrium compliance rate among regulated firms

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  • Häckner, Jonas
  • Herzing, Mathias

Abstract

This study develops a framework for the strategic interaction of firms that have to decide between adhering to and violating legislation. Depending on how deterring enforcement is various degrees of compliance with the law will arise in equilibrium. For an agency that targets a certain compliance rate more resources per firm should be allocated to industries with strong demand and high costs for adhering to legislation. Whenever some degree of non-compliance among competing firms can be expected, more inspection resources are needed in markets where products are highly differentiated and/or the number of firms is small.

Suggested Citation

  • Häckner, Jonas & Herzing, Mathias, 2020. "The equilibrium compliance rate among regulated firms," International Review of Law and Economics, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:irlaec:v:63:y:2020:i:c:s0144818819302996
    DOI: 10.1016/j.irle.2020.105911
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    References listed on IDEAS

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    More about this item

    Keywords

    Inspections; Equilibrium compliance; Market structure; Product differentiation; Cournot competition;
    All these keywords.

    JEL classification:

    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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