Optimal Law Enforcement Under Asymmetric Information

UPF Department of Economics Working Paper No. 401

16 Pages Posted: 14 Nov 2000

See all articles by Mohamed Jellal

Mohamed Jellal

Nuno Garoupa

George Mason University - Antonin Scalia Law School, Faculty

Date Written: June 1999

Abstract

In this paper, we focus on the problem created by asymmetric information about the enforcer's (agent's) costs associated to enforcement expenditure. This adverse selection problem affects optimal law enforcement because a low cost enforcer may conceal its information by imitating a high cost enforcer, and must then be given a compensation to be induced to reveal its true costs. The government faces a trade-off between minimizing the enforcer's compensation and maximizing the net surplus of harmful acts. As a consequence, the probability of apprehension and punishment is usually reduced leading to more offenses being committed.

We show that asymmetry of information does not affect law enforcement as long as raising public funds is costless. The consideration of costly raising of public funds permits to establish the positive correlation between asymmetry of information between government and enforcers and the crime rate.

JEL Classification: K4

Suggested Citation

Jellal, Mohamed and Garoupa, Nuno, Optimal Law Enforcement Under Asymmetric Information (June 1999). UPF Department of Economics Working Paper No. 401. Available at SSRN: https://ssrn.com/abstract=199055 or http://dx.doi.org/10.2139/ssrn.199055

Nuno Garoupa (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

No contact information is available for Mohamed Jellal

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