Enforcement Costs and the Optimal Magnitude and Probability of Fines

19 Pages Posted: 27 Feb 2001

See all articles by A. Mitchell Polinsky

A. Mitchell Polinsky

Stanford Law School; National Bureau of Economic Research (NBER)

Steven Shavell

Harvard Law School; National Bureau of Economic Research (NBER)

Date Written: September 1990

Abstract

Some of the costs of enforcing laws are fixed" - - in the sense that they do not depend on the number of individuals who commit harmful acts- -while other costs are "variable"- - they rise with the number of such individuals. This article analyzes the effects of fixed and variable enforcement costs on the optimal fine and the optimal probability of detection. It is shown that the optimal fine rises to reflect variable enforcement costs; that the optimal fine is not directly affected by fixed enforcement costs; and that the optimal probability depends on both types of enforcement costs.

Suggested Citation

Polinsky, A. Mitchell and Shavell, Steven, Enforcement Costs and the Optimal Magnitude and Probability of Fines (September 1990). NBER Working Paper No. w3429. Available at SSRN: https://ssrn.com/abstract=241431

A. Mitchell Polinsky (Contact Author)

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Steven Shavell

Harvard Law School ( email )

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National Bureau of Economic Research (NBER)

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