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Inspection Intensity and Market Structure

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  • Stéphan Marette

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.

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File URL: http://www.card.iastate.edu/publications/DBS/PDFFiles/05wp412.pdf
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File URL: http://www.card.iastate.edu/publications/synopsis.aspx?id=876
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Bibliographic Info

Paper provided by Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University in its series Food and Agricultural Policy Research Institute (FAPRI) Publications with number 05-wp412.

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Date of creation: Oct 2005
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Handle: RePEc:ias:fpaper:05-wp412

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Keywords: inspection policies; market regulation; regulatory funding.;

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