The equilibrium compliance rate among regulated firms

Jonas Häckner () and Mathias Herzing ()

International Review of Law and Economics, 2020, vol. 63, issue C

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.

Keywords: Inspections; Equilibrium compliance; Market structure; Product differentiation; Cournot competition (search for similar items in EconPapers)
JEL-codes: K32 L13 L51 Q58 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:63:y:2020:i:c:s0144818819302996

DOI: 10.1016/j.irle.2020.105911

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