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A repeated game of self regulation

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  • Javier I.Núnez Errázuriz

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Abstract

This paper analyses incentives for self-regulation of quality from a principal-agent perspective, in a context of repeated interaction between a Self-Regulatory Organization (SRO) and consumers who can not observe SRO vigilance choice or fraud perfectly. This work unveils five obstacles for positive SRO vigilance to occur in equilibrium. However, this article also shows that public regulation in parallel to Self-Regulation can enhance SRO incentives to monitor quality and reduce fraud. Therefore, defying conventional wisdom, a mix of public and self regulation may be preferred because it would benefit from SROs informational advantage about quality, while public regulation would provide the incentives to monitor quality that may be absent otherwise.

Suggested Citation

  • Javier I.Núnez Errázuriz, 2000. "A repeated game of self regulation," Estudios de Economia, University of Chile, Department of Economics, vol. 27(1 Year 20), pages 33-54, June.
  • Handle: RePEc:udc:esteco:v:27:y:2000:i:1:p:33-54
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    File URL: http://www.econ.uchile.cl/uploads/publicacion/d164df16-d816-403c-9ac2-b4678a1b3629.pdf
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    References listed on IDEAS

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    1. Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring.
    2. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    3. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    4. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    5. Gehrig, Thomas & Jost, Peter-J, 1995. "Quacks, Lemons, and Self Regulation: A Welfare Analysis," Journal of Regulatory Economics, Springer, vol. 7(3), pages 309-325, May.
    6. Radner, Roy, 1985. "Repeated Principal-Agent Games with Discounting," Econometrica, Econometric Society, vol. 53(5), pages 1173-1198, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Self-Regulation; Quality Regulation; fraud; corruption.;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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