Citation

Grajzl P, Baniak A. Int. Rev. Law Econ. 2009; 29(4): 360-374.

Copyright

(Copyright © 2009, Elsevier Publishing)

DOI

10.1016/j.irle.2009.03.004

PMID

unavailable

Abstract

We characterize the comparative efficiency of industry self-regulation as means of social control of torts. Unlike liability, which is imposed by courts ex post, industry self-regulation, much like government regulation, acts before the harm is done. As compared to government regulators, however, the industry regulates with superior information. Furthermore, a pro-industry bias inherent to self-regulation also arises under alternative institutional arrangements when adjudicators are vulnerable to pressure by industry members. We show when industry self-regulation is socially desirable and feasible, and clarify when it could be an attractive institutional arrangement for developing and transition countries.