The Impact of Heterogeneity on the Optimal Self-Reporting Scheme
12 Pages Posted: 7 Oct 2002
Date Written: August 2002
We consider a model of optimal law enforcement where sanctions can be reduced for self-reporting individuals. After having committed a crime, individuals get private information on their probabilities of apprehension. 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 show that the optimal fine reduction is strictly decreasing in the heterogeneity of the criminals' types. This result is important when designing self-reporting schemes in reality.
Keywords: self-reporting, tax amnesties, optimal law enforcement, ex post asymmetric information
JEL Classification: D62, D82, H50, K42
Suggested Citation: Suggested Citation