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A repeated game of self regulation

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  • Javier I.Núnez Errázuriz

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Abstract

This paper analyses incentives for self-regulation of quality from a principal-agent perspective, in a context of repeated interaction between a Self-Regulatory Organization (SRO) and consumers who can not observe SRO vigilance choice or fraud perfectly. This work unveils five obstacles for positive SRO vigilance to occur in equilibrium. However, this article also shows that public regulation in parallel to Self-Regulation can enhance SRO incentives to monitor quality and reduce fraud. Therefore, defying conventional wisdom, a mix of public and self regulation may be preferred because it would benefit from SROs informational advantage about quality, while public regulation would provide the incentives to monitor quality that may be absent otherwise.

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File URL: http://www.econ.uchile.cl/uploads/publicacion/d164df16-d816-403c-9ac2-b4678a1b3629.pdf
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Bibliographic Info

Article provided by University of Chile, Department of Economics in its journal Estudios de Economia.

Volume (Year): 27 (2000)
Issue (Month): 1 Year 2000 (June)
Pages: 33-54

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Handle: RePEc:udc:esteco:v:27:y:2000:i:1:p:33-54

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Web page: http://www.econ.uchile.cl/
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Related research

Keywords: Self-Regulation; Quality Regulation; fraud; corruption.;

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  1. Radner, Roy, 1985. "Repeated Principal-Agent Games with Discounting," Econometrica, Econometric Society, vol. 53(5), pages 1173-98, September.
  2. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
  3. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Gehrig, Thomas & Jost, Peter-J, 1995. "Quacks, Lemons, and Self Regulation: A Welfare Analysis," Journal of Regulatory Economics, Springer, vol. 7(3), pages 309-25, May.
  5. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring.
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