Modelling "race to the bottom" effect on the self-regulated markets

The effect of the competition among self-regulatory organizations (SROs) on the efficiency of the corresponding goods and services markets is studied. It is shown that under certain conditions the competition among SROs worsens the quality of the goods and services and leads to decreasing consumers’ welfare. Moreover, the distinctive feature of the competition among SROs in comparison with other types of regulatory competition is that even introduction of the alternative state control does not improve the situation. The proposals are formulated for self-regulatory markets’ structure and conditions change in order to reduce the negative effects of the SROs’ competition.