ITEM METADATA RECORD
Title: Learning about compliance under asymmetric information
Authors: Arguedas, Carmen
Rousseau, Sandra
Issue Date: Feb-2008
Publisher: K.U.Leuven, Faculty of Economics and Applied Economics : Department of Economics
Series Title: CES - Discussion paper series (DPS) 08.08 pages:1-35
Abstract: Over time, inspection agencies gather information about firms that cause harmful externalities. This information may allow agencies to differentiate their monitoring strategies in the future, since inspections can be influenced by firms’ past performance relative to other competitors in the market. If a firm is less successful than its peers in reducing the externality, it faces the risk of being targeted for increased inspections in the next period. This risk of stricter monitoring might induce high cost firms to mimic low cost firms, while the latter might try to avoid being mimicked. We show that under certain circumstances, mimicking, or even the threat of mimicking, might reduce socially harmful activities and thus be welfare improving.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center of Energy, Transport and Environment, Leuven

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