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Regulatory compliance, information disclosure and peer effects: evidence from the Mexican gasoline market

Author

Listed:
  • Xian Liu

    (Tianjin University of Finance and Economics)

  • Barrett Kirwan

    (University of Illinois at Urbana-Champaign)

  • Andrea Martens

    (KU Leuven)

Abstract

Policy makers and regulators are increasingly interested in the use of information disclosure as a regulatory instrument to improve firms’ behavior. However, little has been done using micro-level data to investigate whether information provision may trigger peer influence among firms that affects their compliance behavior. Using station-level inspection verification data from the Mexican gasoline market, this paper examines whether gas stations react to peers’ performance to adjust their own compliance decisions. The information disclosure policy assigned each inspected gas station with green, yellow, or red colors to indicate the status of compliance, minor violation, and severe violation, respectively. We find strong evidence of peer influence triggered by information spillover. The probability of being in compliance increases as the number of “green” peers increases. We use both municipalities and postal codes as geographic boundaries to define potential peers, and find similar results. Our findings also suggest that the magnitude of peer effects varies across municipalities: the effects appear to be greater in wealthier, more educated communities.

Suggested Citation

  • Xian Liu & Barrett Kirwan & Andrea Martens, 2018. "Regulatory compliance, information disclosure and peer effects: evidence from the Mexican gasoline market," Journal of Regulatory Economics, Springer, vol. 54(1), pages 53-80, August.
  • Handle: RePEc:kap:regeco:v:54:y:2018:i:1:d:10.1007_s11149-018-9362-1
    DOI: 10.1007/s11149-018-9362-1
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    Cited by:

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    2. Jayanath Ananda & Nicholas Pawsey & Tahmid Nayeem, 2022. "Customer‐centric regulation: The case of Victorian urban water sector," Regulation & Governance, John Wiley & Sons, vol. 16(2), pages 536-556, April.

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    More about this item

    Keywords

    Peer effects; Regulation; Mexico; Asymmetric information; Gasoline markets;
    All these keywords.

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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