August 10, 2021

“Misconduct, Peer Learning, and Strategic Enforcement,” (joint with Kai Du, Phillip Stocken and Zhe Wang)

We consider a dynamic model, wherein two firms test a regulator’s enforcement propensity with misconduct actions, and the regulator disciplines the firms to build a reputation of strict enforcement. We characterize the regulator's enforcement strategies and the firms’ equilibrium misconduct levels. We show that when the regulator has full discretion on

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