Too Small to Regulate
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. A model is constructed to sh...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/05/19457865/too-small-regulate http://hdl.handle.net/10986/18342 |
| Summary: | 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. A model is constructed 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. |
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