Regulatory Capacity in a Game of Asymmetric Regulation

Jacopo Gambato (), Bernhard Ganglmair () and Julia Krämer ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: In a model of asymmetric regulation, a firm can comply with two regulatory targets, and a regulator can audit the firm for compliance. Inspection by the regulator is imperfect, and it assesses the firm’s compliance with the targets with different success probabilities. The firm fully complies only if compliance costs are low. Otherwise, the firm always prioritizes the requirement that is easier to enforce. Expanding regulatory capacity positively affects compliance with the easy-to-enforce target; however, a higher capacity can harm compliance with the hard-to-enforce target.

Keywords: agency resources; asymmetric enforcement; compliance; multi-tasking; regulation (search for similar items in EconPapers)
JEL-codes: H32 K20 L51 (search for similar items in EconPapers)
Pages: 12
Date: 2025-10
New Economics Papers: this item is included in nep-law and nep-mic
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