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Self-regulation and governmental oversight: a theoretical and experimental study

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  • Silvester Koten

    (Jan Evangelista Purkyně University (FSE-UJEP))

Abstract

A self-regulatory organization (SRO) is a non-governmental organization owned and operated by its members, with the power to create and enforce industry regulations and standards for its members. A key question is whether oversight by an SRO can replace governmental oversight, or whether supplementary governmental oversight is necessary. Using a formal model for the financial sector, and solving simultaneous games, I show that a lack of commitment by the SRO may necessitate governmental oversight of both SRO members and the SRO itself. The core of the model is supported by economics experiments.

Suggested Citation

  • Silvester Koten, 2021. "Self-regulation and governmental oversight: a theoretical and experimental study," Journal of Regulatory Economics, Springer, vol. 59(2), pages 161-174, April.
    • Handle: RePEc:kap:regeco:v:59:y:2021:i:2:d:10.1007_s11149-020-09421-0
    DOI: 10.1007/s11149-020-09421-0
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    References listed on IDEAS

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    3. Silvester Van Koten & Andreas Ortmann, 2016. "Self-Regulatory Organizations under the Shadow of Governmental Oversight: An Experimental Investigation," Research in Experimental Economics, in: Experiments in Organizational Economics, volume 19, pages 85-104, Emerald Group Publishing Limited.
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    5. Javier Núñez, 2007. "Can self regulation work?: a story of corruption, impunity and cover-up," Journal of Regulatory Economics, Springer, vol. 31(2), pages 209-233, April.
    6. Silvester Van Koten & Andreas Ortmann, 2013. "Self-regulating organizations under the shadow of governmental oversight: An experimental investigation," Discussion Papers 2013-13, School of Economics, The University of New South Wales.
    7. Carson, John, 2011. "Self-regulation in securities markets," Policy Research Working Paper Series 5542, The World Bank.
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    9. Jos頌uis Lima & Javier Nú, 2015. "Does self-regulation work? Experimental evidence of the reputational incentives of Self-Regulatory Organizations," Applied Economics, Taylor & Francis Journals, vol. 47(41), pages 4423-4441, September.
    10. Maxwell, John W & Lyon, Thomas P & Hackett, Steven C, 2000. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 583-617, October.
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    Cited by:

    1. Ismail Saglam, 2023. "Incentives of a monopolist for innovation under regulatory threat," Economics of Governance, Springer, vol. 24(1), pages 41-66, March.

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    More about this item

    Keywords

    Self-regulatory organizations; Meta-regulation; Governmental oversight; Simultaneous versus sequential games; Economics experiments;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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