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Self-Regulation, Innovation, and the Financial Industry

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Abstract

The paper shows that the presence of continuous innovation may be one of the driving forces of self-regulation. In an infinitely repeated game, there exists a class of subgame perfect equilibria in which the self-regulatory organization, or SRO, pursues socially desirable objectives along the equilibrium path to stave off government intervention. Delegating regulatory authority to the SRO eliminates certification-related delays in the adoption of new services, fosters innovation and leads to higher social welfare.

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  1. Payment Studies, Research Department, Federal Reserve Bank of New York, 33 Liberty Street, New York, NY, 10045–0001

    Christodoulos Stefanadis

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  1. Christodoulos Stefanadis
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Stefanadis, C. Self-Regulation, Innovation, and the Financial Industry. Journal of Regulatory Economics 23, 5–25 (2003). https://doi.org/10.1023/A:1021858812744

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  • DOI: https://doi.org/10.1023/A:1021858812744

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