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

Author

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  • Gilpatric, Scott M.
  • Vossler, Christian A.
  • Liu, Lirong

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.

Suggested Citation

  • Gilpatric, Scott M. & Vossler, Christian A. & Liu, Lirong, 2015. "Using competition to stimulate regulatory compliance: A tournament-based dynamic targeting mechanism," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 182-196.
  • Handle: RePEc:eee:jeborg:v:119:y:2015:i:c:p:182-196
    DOI: 10.1016/j.jebo.2015.08.006
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:jeeman:v:84:y:2017:i:c:p:62-83 is not listed on IDEAS
    2. Jessica Coria & Xiao-Bing Zhang, 2015. "State-Dependent Enforcement to Foster the Adoption of New Technologies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 359-381, October.
    3. Ralph-C. Bayer, 2017. "The Double Dividend of Relative Auditing – Theory and Experiments on Corporate Tax Enforcement," School of Economics Working Papers 2017-14, University of Adelaide, School of Economics.
    4. Coria, Jessica & Zhang, Xiao-Bing, 2015. "The Harrington Paradox Squared," Working Papers in Economics 608, University of Gothenburg, Department of Economics.

    More about this item

    Keywords

    Dynamic tournament; Contests; Competition; Regulatory enforcement; Targeting; Self-reporting;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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