Self-reporting and market structure

Many regulators utilize self-reporting, that is, wrongdoers reporting their own crimes to the authority, to enforce regulations in a variety of market contexts. This paper studies the effectiveness of self-reporting within the context of an oligopoly. We identify two important consequences of implementing self-reporting (relative to no-reporting) for a welfare-maximizing regulator. First, if the regulator can control only the audit probability and fine, then whether compliance rises or falls upon implementing self-reporting depends on the level of competition. Second, if the regulator can also control the market size, then the welfare-maximizing policy entails self-reporting but with more competition and lower compliance than under no-reporting.