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The Desirability of forgiveness in regulatory enforcement

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  • Arun Malik

Abstract

I present a model that explains two common features of regulatory enforcement: selective forgiveness of noncompliance, and the collection of information on a firm’s compliance activities and not just its compliance status. I show that forgiving noncompliance is optimal if the information on a firm’s compliance activities constitutes sufficiently strong evidence of the firm having exerted a high level of compliance effort. The key benefit of forgiving noncompliance is a reduction in the probability with which the firm needs to be monitored. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Arun Malik, 2014. "The Desirability of forgiveness in regulatory enforcement," Journal of Regulatory Economics, Springer, vol. 46(1), pages 1-22, August.
    • Handle: RePEc:kap:regeco:v:46:y:2014:i:1:p:1-22
    DOI: 10.1007/s11149-014-9254-y
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    References listed on IDEAS

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    Cited by:

    1. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Documents de travail du Centre d'Economie de la Sorbonne 22013, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Andarge, Tihitina & Lichtenberg, Erik, 2018. "Regulated Firm Strategy under Uncertainty about Regulatory Status," 2018 Annual Meeting, August 5-7, Washington, D.C. 274420, Agricultural and Applied Economics Association.
    3. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-03704334, HAL.
    4. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Post-Print halshs-03704334, HAL.
    5. Tihitina Andarge & Erik Lichtenberg, 2020. "Regulatory compliance under enforcement gaps," Journal of Regulatory Economics, Springer, vol. 57(3), pages 181-202, June.

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    More about this item

    Keywords

    Enforcement of regulation; Selective enforcement; Forgiving noncompliance; Harrington paradox; L51; K42; K32; D86;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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