Reputational Sanctions in Private and Public Regulation

Abstract

This article analyses how reputation functions as a mechanism for social control in private and public regulation. It discusses three cases of private markets where reputation is a powerful and effective mechanism for social control. From the case studies, four characteristics of markets with effective reputational sanctions are identified.

Reputational sanctioning is not limited to the private sphere. More and more, public regulators are disclosing names of sanctioned companies or experimenting with naming and shaming, in the expectation that this will enhance the impact of their enforcement strategies on compliance. However, this article argues that the conditions that contribute to the strength of reputation as a regulatory mechanism in private markets are often absent in public regulation.

Keywords: reputation, self-regulation, market regulation, enforcement