Optimal Law Enforcement with Sophisticated and Naive Offenders

34 Pages Posted: 9 Aug 2018

See all articles by Berno Buechel

Berno Buechel

University of Fribourg - Faculty of Economics and Social Science

Eberhard Feess

Frankfurt School of Finance & Management gemeinnützige GmbH

Gerd Muehlheusser

University of Hamburg; IZA Institute of Labor Economics

Date Written: June 20, 2018

Abstract

Research in criminology has shown that the perceived risk of apprehension often differs substantially from the true level. To account for this insight, we extend the standard economic model of law enforcement (Becker, 1968) by considering two types of offenders, sophisticates and naïves. The former are always fully informed about the enforcement effort, the latter become informed only when the effort is revealed by the authority; otherwise, naïves rely on their perceptions. We characterize the optimal enforcement effort and the decision whether to hide or reveal it. The welfare-maximizing authority chooses either a relatively high effort which is then revealed, or it chooses a relatively low effort which remains hidden. The latter policy becomes more favorable, the larger the share of naïves in the population and the higher their level of perceived effort. We then analyze three empirically important extensions, thereby allowing for lower efficacy of the enforcement effort due to avoidance activities, endogenous fines, and heterogeneity with respect to naïves’ perceptions.

Keywords: optimal law enforcement, deterrence, behavioral law & economics, naïveté, shrouding

JEL Classification: K420, D730

Suggested Citation

Buechel, Berno and Feess, Eberhard and Muehlheusser, Gerd, Optimal Law Enforcement with Sophisticated and Naive Offenders (June 20, 2018). CESifo Working Paper Series No. 7106. Available at SSRN: https://ssrn.com/abstract=3229032

Berno Buechel

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

Eberhard Feess

Frankfurt School of Finance & Management gemeinnützige GmbH ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

Gerd Muehlheusser (Contact Author)

University of Hamburg ( email )

Von Melle Park 5
Hamburg, 20146
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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