Abstract

In an evolutionary game setting we have shown that either perfect compliance or perfect non-compliance with a regulation can evolve as an asymptotically stable state. However, this depends critically on the size of a defector’s additional payoff when there is no private monitoring to a cooperator’s payoff, relative to his expected fine from an enforcer’s monitoring. As an enforcer’s willingness to monitor voluntarily gets affected by their relative share of the population to the defectors’, the society could be stuck in the neighborhood of the initial state if many defectors already exist and a little larger than enforcers, even though the regulatory agency has a strong policy in its enforcement.

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