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Rewards and Regulation

Braithwaite, John

Description

Rewards are less useful in regulation than they are in markets. Firms respond to market incentives because most markets are contestable. In markets that are not oligopolies it makes more sense to adopt a competitor mentality than a fixer mentality. Regulatory power in contrast is mostly not contestable. Firms are therefore more likely to adopt a fixer or game-playing mentality. Reactance to regulatory control through rewards is likely to be greater than reactance to market discipline. If a...[Show more]

dc.contributor.authorBraithwaite, John
dc.date.accessioned2015-12-13T22:17:45Z
dc.identifier.issn0263-323X
dc.identifier.urihttp://hdl.handle.net/1885/71303
dc.description.abstractRewards are less useful in regulation than they are in markets. Firms respond to market incentives because most markets are contestable. In markets that are not oligopolies it makes more sense to adopt a competitor mentality than a fixer mentality. Regulatory power in contrast is mostly not contestable. Firms are therefore more likely to adopt a fixer or game-playing mentality. Reactance to regulatory control through rewards is likely to be greater than reactance to market discipline. If a responsive regulatory pyramid is a good strategy for optimizing compliance, then punishment is more useful in regulation than reward. Reward at the middle of a regulatory pyramid brings about a moral hazard problem. Under certain limited conditions reward can be useful at the base of a regulatory pyramid. These conditions are transparent, easy measurement of the performance to be rewarded, an imbalance of power such that the regulatee is weak in comparison to the regulator, and an absence of weapons of the weak for subverting a regulatory system to which the weak are subject. Absent these conditions, and we cannot expect the undoubted efficiency advantages of a market where regulatory outcomes can be traded so that they are secured where the cost of doing so is least. While, in general, punishments are more useful to regulators than monetary rewards, informal rewards (praise, letters of recognition) are rather consistently useful in securing compliance.
dc.publisherBlackwell Publishing Ltd
dc.sourceJournal of Law and Society
dc.titleRewards and Regulation
dc.typeJournal article
local.description.notesImported from ARIES
local.description.refereedYes
local.identifier.citationvolume29
dc.date.issued2002
local.identifier.absfor180119 - Law and Society
local.identifier.ariespublicationMigratedxPub2653
local.type.statusPublished Version
local.contributor.affiliationBraithwaite, John, College of Arts and Social Sciences, ANU
local.description.embargo2037-12-31
local.bibliographicCitation.issue1
local.bibliographicCitation.startpage12
local.bibliographicCitation.lastpage26
dc.date.updated2015-12-11T07:36:36Z
local.identifier.scopusID2-s2.0-0036522804
CollectionsANU Research Publications

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