Optimal Enforcement with Heterogeneous Private Costs of Punishment

Document Type

Article

Publication Date

6-2021

Journal Title

Journal of Legal Studies

ISSN

0047-2530

DOI

10.1086/715437

Abstract

We formalize the idea that regulatory devices may generate different incentive effects for different individuals. These unequal incentive effects can generate social costs by causing some individuals to be overdeterred and others to be underdeterred. This is an underappreciated dimension over which one ought to compare the efficiency of various regulatory tools. We then note various methods to reduce inefficiencies caused by unequal incentive effects. Among others, we show that combining tools that have negatively related effects can improve welfare, increasing the probability of detection can be preferable to imposing large transferable sanctions, and regulators should incur real costs to be able to make more extensive use of unvarying instruments.

First Page

445

Last Page

472

Num Pages

27

Volume Number

50

Issue Number

2

Publisher

The University of Chicago Press

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