Optimal Self-Reporting Schemes with Multiple Stages and Option Values

21 Pages Posted: 3 Sep 2002

See all articles by Markus Walzl

Markus Walzl

RWTH Aachen University - Chair for Economics (Microeconomics)

Eberhard Feess

Frankfurt School of Finance & Management gemeinn├╝tzige GmbH

Date Written: August 2002

Abstract

We consider a model of optimal law enforcement where sanctions can be reduced for self-reporting individuals. The literature is extended in two directions: First, we distinguish between two self-reporting stages: a first one before the case is investigated, and a second one where the criminal is detected but not yet convicted. Second, we assume that violators have private information in both stages. This leads to an option value of self-reporting, since criminals can decide whether to come forward or not after they have learned their types. We characterize the optimal policy and relate our results to self-reporting schemes observed in reality.

Keywords: self-reporting, tax amnesties, optimal law enforcement, ex post asymmetric information

JEL Classification: D62, D82, H50, K42

Suggested Citation

Walzl, Markus and Feess, Eberhard, Optimal Self-Reporting Schemes with Multiple Stages and Option Values (August 2002). Available at SSRN: https://ssrn.com/abstract=322461 or http://dx.doi.org/10.2139/ssrn.322461

Markus Walzl (Contact Author)

RWTH Aachen University - Chair for Economics (Microeconomics) ( email )

Aachen, 52056
Germany
0049 241 809 6157 (Phone)
0049 241 809 2345 (Fax)

Eberhard Feess

Frankfurt School of Finance & Management gemeinn├╝tzige GmbH ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

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