Научные исследования экономического факультета. Электронный журнал.

E.I. Larina, A. Jurevičiūtė Opportunistic Propensity of Oil Companies in the Safety Issues

Abstract

Oil spills are harmful to both the environment and people. To avoid accidents companies must follow the safety regulations established by the state. Companies tend to avoid compliance with the regulations or fail to comply with them. Inspections of oil companies are carried out by the state in order to ensure an acceptable level of safety at the enterprises. Inspections can be both planned and unscheduled. In this paper we model a competitive market with two oil companies deciding whether to comply with the safety regulations or not. The results of the research show that in the competitive environment companies choose behavioral strategies depending on the expected probability of the inspection. Thus, the higher the probability of the audit, the sooner the company will comply with the safety rules.

Key words: oil spills, accidents, oil companies, safety rules, government inspections, competitive market, game theory, mixed strategies.

JEL codes: C 700, C 720, D 210.