Inspection Intensity and Market Structure
AbstractAn 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.
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Bibliographic InfoPaper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 05-wp412.
Date of creation: Oct 2005
Date of revision:
inspection policies; market regulation; regulatory funding.;
Other versions of this item:
- StÃ©phan Marette, 2005. "Inspection Intensity and Market Structure," Food and Agricultural Policy Research Institute (FAPRI) Publications 05-wp412, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
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