Self-regulation versus government regulation: an externality view
Who should be responsible for industry regulation, a private self-regulatory agency or a public agency? This paper provides a simple framework to analyze the optimal scope of a private self-regulatory organization (SRO) versus government regulation. The trade-off depends on three key elements: exter...
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| Veröffentlicht in: | Journal of regulatory economics 2020-12, Vol.58 (2-3), p.166-183 |
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| container_title | Journal of regulatory economics |
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| creator | Ma, Chang |
| description | Who should be responsible for industry regulation, a private self-regulatory agency or a public agency? This paper provides a simple framework to analyze the optimal scope of a private self-regulatory organization (SRO) versus government regulation. The trade-off depends on three key elements: externalities, monopoly distortions, and the degree of asymmetric information. Self-regulation is more desirable than government regulation if the degree of asymmetric information between the public regulator and private industry is larger than the size of the monopoly distortion and externalities from the industry to society. An optimal mechanism consists of both self-regulation and government regulation where an SRO internalizes externalities within the industry and the government corrects any distortions generated by the SRO. These insights can be applied to many practical settings and policy discussions—for example, in the context of the financial sector, as with the Financial Industry Regulatory Authority. |
| doi_str_mv | 10.1007/s11149-020-09415-y |
| format | Article |
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| ispartof | Journal of regulatory economics, 2020-12, Vol.58 (2-3), p.166-183 |
| issn | 0922-680X 1573-0468 |
| language | eng |
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| source | PAIS Index; SpringerLink Journals; EBSCOhost Business Source Complete |
| subjects | Asymmetric information Distortion Economics Economics and Finance Externality Government Industrial Organization Microeconomics Monopolies Original Article Public Finance Regulation Regulatory agencies Self regulation |
| title | Self-regulation versus government regulation: an externality view |
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