Optimal Law Enforcement with Ordered Leniency

Claudia Landeo and Kathryn E. Spier

No 25095, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: C72 D86 K10 L23 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-law
Note: LE
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Citations: View citations in EconPapers (5)

Published as Claudia M. Landeo & Kathryn E. Spier, 2020. "Optimal Law Enforcement with Ordered Leniency," The Journal of Law and Economics, vol 63(1), pages 71-111.

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Working Paper: Optimal Law Enforcement with Ordered Leniency (2018)
Working Paper: Optimal Law Enforcement with Ordered Leniency (2018)
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