Landeo & Spier on Optimal Law Enforcement

Claudia M. Landeo and Kathryn E. Spier (University of Alberta – Department of Economics and Harvard University – Law School – Faculty) has posted Optimal Law Enforcement with Ordered Leniency on SSRN.  Here is the abstract: This paper studies the design of enforcement policies to detect and deter harmful short-term activities committed by groups of injurers. With an ordered-leniency policy, the degree of leniency granted to an injurer who self-reports depends on his or her position in the self-reporting queue. By creating a "race to the courthouse," ordered-leniency policies lead to faster detection and stronger deterrence of illegal activities. The socially-optimal level of deterrence can be obtained at zero cost when the externalities associated with the harmful activities are not too high. Without leniency for self-reporting, the enforcement cost is strictly positive and there is underdeterrence of harmful activities relative to the first-best level.…

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