Inspection Intensity and Market Structure

Stephan Marette

No 18351, Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem

Abstract: An investigation of financing an inspection policy while allowing the enforcement of a market regulation is described. A simple model shows that the intensity of controls depends on the market structure. Under a given number of firms, the per-firm probability of controls is lower than one, since firms' incentive to comply with regulation holds under positive profits. In this case, a lump-sum tax is used for limiting distortions coming from financing with a fixed fee. Under free entry, the per-firm probability of controls is equal to one, and only a fixed fee that prevents excess entry is used to finance inspection.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 18
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ags:hebarc:18351

DOI: 10.22004/ag.econ.18351

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