Multijurisdictional Enforcement Games
The Research Handbook on Corporate Crime and Financial Misdealing, Jennifer Arlen ed., Forthcoming
47 Pages Posted: 13 May 2016 Last revised: 22 Oct 2017
Date Written: May 12, 2016
Economic analyses of law enforcement generally focus on situations in which law is enforced by a single public agency in a single jurisdiction which faithfully follows its announced enforcement strategy. This does not reflect the reality of enforcement aimed at corporate crime, which commonly involves multiple agencies, often based in different jurisdictions. This chapter will discuss the analysis of multijurisdictional law enforcement, with particular reference to cases concerning foreign bribery. The premise is that this kind of interaction can be modelled as a dynamic multi-player game in which the players include both enforcement agencies and firms. The first step is to describe the structure of the game: the range of possible players, the actions open to them, and their preferences over outcomes, as well as when the players act and what they know about other players’ actions. The next step is to discuss how the enforcement game is likely to be played, meaning what strategies firms and enforcement agencies are likely to adopt. In principle, this kind of analysis can be used to formulate testable hypotheses about outcomes of interactions between regulators and firms. Unfortunately, opportunities to evaluate these kinds of hypotheses empirically are limited because many aspects of the structure of the game are difficult to observe, and firms’ misconduct and regulators’ enforcement activities typically are only observable when they result in formal sanctions. The chapter concludes with a discussion of some of the challenges inherent in normative analysis of the outcomes of multi-jurisdictional law enforcement games.
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