IDEAS home Printed from https://ideas.repec.org/a/spr/jqecon/v15y2017i1d10.1007_s40953-017-0072-9.html
   My bibliography  Save this article

Too Small to Regulate

Author

Listed:
  • Kaushik Basu

    () (Cornell University)

  • Avinash Dixit

    (Princeton University)

Abstract

Abstract The paper argues that to achieve compliance of firms with regulations such as product quality or environmental or health standards it is better to have industries with a few large corporations than numerous small firms. We construct a model to show that limited liability constraints bind more easily in competitive industries, making it harder to impose sufficiently severe penalties and costlier to send sufficient monitors. Having large corporations allows the government effectively to delegate some of its monitoring functions to the managers of the corporation. The tradeoff between this issue and the usual argument in favor of competition is considered.

Suggested Citation

  • Kaushik Basu & Avinash Dixit, 2017. "Too Small to Regulate," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(1), pages 1-14, March.
  • Handle: RePEc:spr:jqecon:v:15:y:2017:i:1:d:10.1007_s40953-017-0072-9
    DOI: 10.1007/s40953-017-0072-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40953-017-0072-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Williamson, Oliver, 2009. "The Theory of the Firm as Governance Structure: From Choice to Contract," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 111-134, December.
    2. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    3. Basu, Kaushik, 2015. "An Economist in the Real World: The Art of Policymaking in India," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262029626, March.
    4. Dharmapala, Dhammika & Slemrod, Joel & Wilson, John Douglas, 2011. "Tax policy and the missing middle: Optimal tax remittance with firm-level administrative costs," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1036-1047, October.
    5. George A. Akerlof & Robert J. Shiller, 2015. "Phishing for Phools: The Economics of Manipulation and Deception," Economics Books, Princeton University Press, edition 1, number 10534.
    6. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    7. Biglaiser, Gary & Friedman, James W., 1994. "Middlemen as guarantors of quality," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 509-531, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:ecomod:v:385:y:2018:i:c:p:89-95 is not listed on IDEAS

    More about this item

    Keywords

    Regulation; Firm size; Limited liability; Corruption; Corporation;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jqecon:v:15:y:2017:i:1:d:10.1007_s40953-017-0072-9. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Mallaigh Nolan). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.