Optimal Law Enforcement with Ordered Leniency

Claudia Landeo and Kathryn E. Spier
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Kathryn E. Spier: Harvard Law School and NBER

No 126, Working Papers from Peruvian Economic Association

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. Hence, ordered-leniency policies are welfare improving. Our findings for environments with groups of injurers complement Kaplow and Shavell's (1994) results for single-injurer environments.

Keywords: Law Enforcement, Ordered Leniency, Self-Reporting, Leniency, Harmful Externalities, Non-Cooperative Games, Prisoners' Dilemma Game, Coordination Game; Risk Dominance; Pareto Dominance; Corporate Misconduct; White-Collar Crime; Securities Fraud; Insider Trading; Market Manipulation; Whistleblowers; Plea Bargaining; Tax Evasion; Environmental Policy Enforcement (search for similar items in EconPapers)
JEL-codes: C72 D86 K10 L23 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Optimal Law Enforcement with Ordered Leniency (2020)
Working Paper: Optimal Law Enforcement with Ordered Leniency (2018)
Working Paper: Optimal Law Enforcement with Ordered Leniency (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:apc:wpaper:126

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