IDEAS home Printed from https://ideas.repec.org/a/eee/irlaec/v63y2020ics0144818819302996.html
   My bibliography  Save this article

The equilibrium compliance rate among regulated firms

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0144818819302996
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irle.2020.105911?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Anthony Heyes, 1994. "Environmental enforcement when ‘inspectability’ is endogenous: A model with overshooting properties," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(5), pages 479-494, October.
    3. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    4. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    5. Paul Belleflamme & Cecilia Vergari, 2011. "Incentives To Innovate In Oligopolies," Manchester School, University of Manchester, vol. 79(1), pages 6-28, January.
    6. Bontems, Philippe & Bourgeon, Jean-Marc, 2005. "Optimal environmental taxation and enforcement policy," European Economic Review, Elsevier, vol. 49(2), pages 409-435, February.
    7. Arun S. Malik, 1990. "Avoidance, Screening and Optimum Enforcement," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 341-353, Autumn.
    8. Häckner, Jonas & Herzing, Mathias, 2017. "The effectiveness of environmental inspections in oligopolistic markets," Resource and Energy Economics, Elsevier, vol. 48(C), pages 83-97.
    9. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    10. Häckner, Jonas & Herzing, Mathias, 2012. "When do Firms Break the Law in Order to Reduce Marginal Cost? - An Application to the Problem of Environmental Inspection," Research Papers in Economics 2012:11, Stockholm University, Department of Economics.
    11. Lai, Ching-Chong & Yang, Chih-Yu & Chang, Juin-Jen, 2003. "Environmental Regulations and Social Norms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(1), pages 63-75, January.
    12. Oestreich, Andreas Marcel, 2017. "On optimal audit mechanisms for environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 62-83.
    13. Häckner, Jonas & Herzing, Mathias, 2016. "Welfare effects of taxation in oligopolistic markets," Journal of Economic Theory, Elsevier, vol. 163(C), pages 141-166.
    14. Innes, Robert, 2001. "Violator Avoidance Activities and Self-Reporting in Optimal Law Enforcement," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 17(1), pages 239-256, April.
    15. Scott M. Gilpatric & Christian A. Vossler & Michael McKee, 2011. "Regulatory enforcement with competitive endogenous audit mechanisms," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 292-312, June.
    16. Nowell, Clifford & Shogren, Jason F, 1994. "Challenging the Enforcement of Environmental Regulation," Journal of Regulatory Economics, Springer, vol. 6(3), pages 265-282, September.
    17. Cason, Timothy N. & Friesen, Lana & Gangadharan, Lata, 2016. "Regulatory performance of audit tournaments and compliance observability," European Economic Review, Elsevier, vol. 85(C), pages 288-306.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Häckner, Jonas & Herzing, Mathias, 2017. "The effectiveness of environmental inspections in oligopolistic markets," Resource and Energy Economics, Elsevier, vol. 48(C), pages 83-97.
    2. Earnhart, Dietrich & Friesen, Lana, 2021. "Use of competitive endogenous audit mechanisms by federal and state inspectors within environmental protection agencies," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    3. Tihitina Andarge & Erik Lichtenberg, 2020. "Regulatory compliance under enforcement gaps," Journal of Regulatory Economics, Springer, vol. 57(3), pages 181-202, June.
    4. Häckner, Jonas & Herzing, Mathias, 2022. "The strategic interaction between cartels and anti-trust authorities," International Review of Law and Economics, Elsevier, vol. 70(C).
    5. Goeschl, Timo & Oestreich, Marcel & Soldà, Alice, 2021. "Competitive vs. Random Audit Mechanisms in Environmental Regulation: Emissions, Self-Reporting, and the Role of Peer Information," Working Papers 0699, University of Heidelberg, Department of Economics.
    6. Andarge, Tihitina & Lichtenberg, Erik, 2018. "Regulated Firm Strategy under Uncertainty about Regulatory Status," 2018 Annual Meeting, August 5-7, Washington, D.C. 274420, Agricultural and Applied Economics Association.
    7. Buccella, Domenico & Fanti, Luciano & Gori, Luca, 2021. "A contribution to the theory of R&D investments," GLO Discussion Paper Series 940, Global Labor Organization (GLO).
    8. Arguedas, Carmen & Rousseau, Sandra, 2012. "Learning about compliance under asymmetric information," Resource and Energy Economics, Elsevier, vol. 34(1), pages 55-73.
    9. Joanna Poyago-Thotoky, 2003. "Optimal Environmental Taxation, R&D Subsidization and the Role of Market Conduct," Finnish Economic Papers, Finnish Economic Association, vol. 16(1), pages 15-26, Spring.
    10. Ghosh, Arghya & Morita, Hodaka, 2008. "An economic analysis of platform sharing," Journal of the Japanese and International Economies, Elsevier, vol. 22(2), pages 164-186, June.
    11. Amir, Rabah & Jin, Jim Y. & Lasselle, Laurence, 2023. "Uniform, efficient and independent Ramsey taxes across markets," Games and Economic Behavior, Elsevier, vol. 138(C), pages 373-386.
    12. Miloš Fišar & Ondřej Krčál & Jiří Špalek & Rostislav Staněk & James Tremewan, 2019. "A Competitive Audit Selection Mechanism with Incomplete Information," MUNI ECON Working Papers 2019-08, Masaryk University, revised Feb 2023.
    13. Häckner, Jonas & Herzing, Mathias, 2022. "Tax incidence in oligopolistic markets," Economics Letters, Elsevier, vol. 213(C).
    14. Jef De Mot & Murat C. Mungan, 2024. "Whistle‐blowing and the incentive to hire," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1292-1308, July.
    15. Jacob Nussim & Avraham Tabbach, 2008. "(Non)Regulable avoidance and the perils of punishment," European Journal of Law and Economics, Springer, vol. 25(3), pages 191-208, June.
    16. Inés Macho‐Stadler & Noriaki Matsushima & Ryusuke Shinohara, 2021. "Organizational Structure and Technological Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 785-816, December.
    17. Henrik Vetter, 2017. "Commodity taxes and welfare under endogenous market conduct," Journal of Economics, Springer, vol. 122(2), pages 137-154, October.
    18. Etro, Federico, 2016. "Research in economics and industrial organization," Research in Economics, Elsevier, vol. 70(4), pages 511-517.
    19. Herzing, Mathias, 2021. "Multiple equilibria in the context of inspection probabilities depending on firms’ relative emissions," Resource and Energy Economics, Elsevier, vol. 63(C).
    20. Robert Innes, 2017. "Lie aversion and self-reporting in optimal law enforcement," Journal of Regulatory Economics, Springer, vol. 52(2), pages 107-131, October.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:63:y:2020:i:c:s0144818819302996. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/irle .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.