Welfare Enhancing Regulation Exemptions
International Review of Law and Economics, Vol. 31, No. 4, 2011
FSU College of Law, Public Law Research Paper No. 504
FSU College of Law, Law, Business & Economics Paper No. 11-7
29 Pages Posted: 8 Apr 2011 Last revised: 24 Jul 2012
Date Written: November 1, 2010
Abstract
Sanctions for regulation violations are used to deter conduct which could potentially result in great social harms. This practice over-deters low-risk entities and under-deters high-risk entities, which leads to social losses. This paper analyzes whether and how such social losses can be mitigated. I show that this can be achieved by allowing regulatees to purchase passes exempting them from regulations at appropriate prices, although they remain liable for any harm they cause.
Keywords: Regulation, Optimal Deterrence, Exemptions
JEL Classification: K0, K2, K23, K32, K4
Suggested Citation: Suggested Citation
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