EconStor >
University of Oslo >
Department of Economics, University of Oslo >
Memorandum, Department of Economics, University of Oslo >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/63147
  
Title:The role of warnings in regulation: Keeping control with less punishment PDF Logo
Authors:Nyborg, Karine
Telle, Kjetil
Issue Date:2003
Series/Report no.:Memorandum, Department of Economics, University of Oslo 2003,24
Abstract:Regulatory agencies frequently present violators with warnings, not pursuing prosecution if the violation ceases upon receipt of the warning. We show how such warnings may help regulators to keep control: Prosecution is costly for the regulator, and insu.cient prosecution e.orts yield low penalties. Thus, with a limited regulatory budget, threats of harsh sanctions are credible only if the number of violators is low. This produces multiple Nash equilibria. If firms may make mistakes, the economy can accidentally switch from one equilibrium to another. Warnings reduce substantially the probability of such accidental switches from the high to the low compliance equilibrium.
Subjects:Enforcement
warnings
multiple equilibria
JEL:D62
K42
L51
Q28
Document Type:Working Paper
Appears in Collections:Memorandum, Department of Economics, University of Oslo

Files in This Item:
File Description SizeFormat
369096908.pdf453.33 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/63147

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.