Using competition to stimulate regulatory compliance: A tournament-based dynamic targeting mechanism

Scott M. Gilpatric, Christian Vossler and Lirong Liu

Journal of Economic Behavior & Organization, 2015, vol. 119, issue C, 182-196

Abstract: This article develops a tournament-based dynamic targeting mechanism for achieving regulatory enforcement leverage. In contrast to existing models which rely on a representative agent, we model a game among a regulated group of agents, possibly heterogeneous in their levels of a regulated activity, that compete through their compliance decisions to avoid being targeted for future audits. The empirical properties of the dynamic tournament are established using economics experiments. In particular, we test comparative statics, highlight the importance of inducing competition through comparisons with a (non-competitive) standards-based targeting mechanism, and demonstrate enforcement leverage through comparisons with simple random audits. The experiments suggest that the dynamic tournament induces incentives consistent with theory, and overall we find that (introducing) competition in the regulatory enforcement arena may have important advantages.

Keywords: Dynamic tournament; Contests; Competition; Regulatory enforcement; Targeting; Self-reporting (search for similar items in EconPapers)
JEL-codes: C91 C92 L51 Q58 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:119:y:2015:i:c:p:182-196

DOI: 10.1016/j.jebo.2015.08.006

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