Deterrence and the Impact of Calculative Thinking on Business Compliance with Regulation
69 Pages Posted: 23 Dec 2009 Last revised: 13 Aug 2014
Date Written: December 23, 2009
Policy responses to corporate misconduct often advocate higher sanctions for better deterrence. This assumes that businesses make decisions about their regulatory compliance behaviour on the basis of self-interested calculations about the costs and gains of that behaviour. But policy-makers often assume that this automatically means higher sanctions will equal more compliance. This paper sets out a more holistic model of calculative thinking about the costs and gains of compliance and non-compliance. We go on to test this model using data about business compliance with Australian consumer protection and competition regulation. We find that enforcement probability is more important than sanction severity, and that business belief in the positive ‘business case’ for compliance is also important.
Keywords: deterrence, compliance, business regulation, competition law, consumer protection law
JEL Classification: K21, K42
Suggested Citation: Suggested Citation