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Can self regulation work?: a story of corruption, impunity and cover-up

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  • Javier Núñez

Abstract

This paper analyzes the reputation-based incentives of a Self-Regulatory Organization (SRO) to detect and expose consumer fraud committed by its members, and the members’ incentives to bribe the SRO in exchange for a cover-up to avoid an external punishment. In a corruption-free benchmark, SROs are effective in detecting, exposing and deterring fraud only if exposure yields a reputation gain to the SRO, which depends on consumers inferences about the SRO’s type. However, if this case prevails the member can succeed in bribing the SRO in exchange for a cover-up and impunity. Despite this, a bribed SRO yields more vigilance and lower fraud than no self-regulation at all. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Javier Núñez, 2007. "Can self regulation work?: a story of corruption, impunity and cover-up," Journal of Regulatory Economics, Springer, vol. 31(2), pages 209-233, April.
    • Handle: RePEc:kap:regeco:v:31:y:2007:i:2:p:209-233
    DOI: 10.1007/s11149-006-9020-x
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    Cited by:

    1. Jos頌uis Lima & Javier Nú, 2015. "Does self-regulation work? Experimental evidence of the reputational incentives of Self-Regulatory Organizations," Applied Economics, Taylor & Francis Journals, vol. 47(41), pages 4423-4441, September.
    2. Silvester Koten, 2021. "Self-regulation and governmental oversight: a theoretical and experimental study," Journal of Regulatory Economics, Springer, vol. 59(2), pages 161-174, April.
    3. Szczygielski, Krzysztof, 2022. "A model of competitive self-regulation," International Review of Law and Economics, Elsevier, vol. 70(C).
    4. Rouvière, Elodie & Caswell, Julie A., 2012. "From punishment to prevention: A French case study of the introduction of co-regulation in enforcing food safety," Food Policy, Elsevier, vol. 37(3), pages 246-254.
    5. Grajzl, Peter & Baniak, Andrzej, 2009. "Industry self-regulation, subversion of public institutions, and social control of torts," International Review of Law and Economics, Elsevier, vol. 29(4), pages 360-374, December.
    6. Silvester Van Koten & Andreas Ortmann, 2016. "Self-Regulatory Organizations under the Shadow of Governmental Oversight: An Experimental Investigation," Research in Experimental Economics, in: Experiments in Organizational Economics, volume 19, pages 85-104, Emerald Group Publishing Limited.
    7. Mary Gugerty, 2009. "Signaling virtue: voluntary accountability programs among nonprofit organizations," Policy Sciences, Springer;Society of Policy Sciences, vol. 42(3), pages 243-273, August.
    8. Karlaganis, Corinne, 2014. "Governance Challenges in Linking Environmental Sustainability to Tourism: Where is the Houseboat Industry in Kerala, India Headed?," Papers 711, World Trade Institute.
    9. Jan Mei Soon & Richard N. Baines, 2013. "Public and Private Food Safety Standards: Facilitating or Frustrating Fresh Produce Growers?," Laws, MDPI, vol. 2(1), pages 1-19, January.
    10. Buckley, Ralf, 2013. "Social-benefit certification as a game," Tourism Management, Elsevier, vol. 37(C), pages 203-209.
    11. Cave, Jonathan & Marsden, Christopher, 2008. "Quis custodiet ipsos custodies in the Internet: self-regulation as a threat and a promise," MPRA Paper 83193, University Library of Munich, Germany.
    12. Szczygielski Krzysztof, 2020. "A note on the optimal scope of professional self-regulation," Central European Economic Journal, Sciendo, vol. 7(54), pages 218-226, January.
    13. Silvester Van Koten & Andreas Ortmann, 2013. "Self-regulating organizations under the shadow of governmental oversight: An experimental investigation," Discussion Papers 2013-13, School of Economics, The University of New South Wales.
    14. Silvester Van Koten, 2015. "Self-Regulatory Organizations Under the Shadow of Governmental Oversight: Blossom Or Perish?," RSCAS Working Papers 2015/84, European University Institute.
    15. Chang Ma, 2020. "Self-regulation versus government regulation: an externality view," Journal of Regulatory Economics, Springer, vol. 58(2), pages 166-183, December.

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    More about this item

    Keywords

    Self-Regulation; Fraud; Corruption; Bribery; L51; K20;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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