COMPLIANCE AND TRUTHFULNESS: LEVERAGING PEER INFORMATION WITH COMPETITIVE AUDIT MECHANISMS

Timo Goeschl, Andreas Oestreich and Alice Solda

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: How to design audit mechanisms that harness the benefits of self-reporting for achieving compliance with regulatory targets while limiting misreporting is a pressing question in many regulatory contexts, from climate policies to public health. Contrasting random audit and competitive audit mechanisms, this paper theoretically and experimentally studies their performance in regulating socially undesirable emissions when peer information about others’ emissions is present or absent. Our focus is on the compliance of emission levels with regulatory targets, going beyond existing results on truthfulness of reporting. Confirming theoretical predictions, the experiment shows that in contrast to the random audit mechanism, the competitive audit mechanism can leverage peer information for compliance: emission levels are closer to the social optimum. Yet, emission levels fall somewhat short of full compliance. The results highlight the considerable potential of competitive audit mechanisms for achieving not only more truthfulness, but also more compliance.

Keywords: Regulation; compliance; tournament theory; online experiment (search for similar items in EconPapers)
JEL-codes: D62 H41 H83 L51 Q58 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2023-05
New Economics Papers: this item is included in nep-acc, nep-ene, nep-env and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://wps-feb.ugent.be/Papers/wp_23_1069.pdf (application/pdf)

Related works:
Journal Article: Compliance and Truthfulness: Leveraging Peer Information with Competitive Audit Mechanisms (2023)
Working Paper: Compliance and Truthfulness: Leveraging Peer Information with Competitive Audit Mechanisms (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:23/1069

Access Statistics for this paper

More papers in Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Nathalie Verhaeghe ().