Optimal Law Enforcement with Ordered Leniency

52 Pages Posted: 1 Oct 2018

See all articles by Claudia M. Landeo

Claudia M. Landeo

University of Alberta - Department of Economics

Kathryn E. Spier

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

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Date Written: September 2018

Abstract

This paper studies the design of enforcement policies to detect and deter harmful short-term activities committed by groups of injurers. With an ordered-leniency policy, the degree of leniency granted to an injurer who self-reports depends on his or her position in the self-reporting queue. By creating a "race to the courthouse," ordered-leniency policies lead to faster detection and stronger deterrence of illegal activities. The socially-optimal level of deterrence can be obtained at zero cost when the externalities associated with the harmful activities are not too high. Without leniency for self-reporting, the enforcement cost is strictly positive and there is underdeterrence of harmful activities relative to the first-best level. Hence, ordered-leniency policies are welfare improving. Our findings for environments with groups of injurers complement Kaplow and Shavell's (1994) results for single-injurer environments.

Suggested Citation

Landeo, Claudia M. and Spier, Kathryn E., Optimal Law Enforcement with Ordered Leniency (September 2018). NBER Working Paper No. w25095, Available at SSRN: https://ssrn.com/abstract=3258192

Claudia M. Landeo (Contact Author)

University of Alberta - Department of Economics ( email )

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Kathryn E. Spier

Harvard University - Law School - Faculty ( email )

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United States
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National Bureau of Economic Research (NBER)

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