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Enforcement Costs and the Optimal Magnitude and Probability of Fines

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Author Info
A. Mitchell Polinsky
Steven Shavell

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Abstract

Some of the costs of enforcing laws are fixed" - - in the sense that they do not depend on the number of individuals who commit harmful acts- -while other costs are "variable"--they rise with the number of such individuals. This article analyzes the effects of fixed and variable enforcement costs on the optimal fine and the optimal probability of detection. It is shown that the optimal fine rises to reflect variable enforcement costs; that the optimal fine is not directly affected by fixed enforcement costs; and that the optimal probability depends on both types of enforcement costs.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3429.

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Date of creation: Oct 1993
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Handle: RePEc:nbr:nberwo:3429

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References listed on IDEAS
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  1. A. Mitchell Polinsky & Steven Shavell, 1984. "Pigouvian Taxation with Administrative Costs," NBER Working Papers 0742, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169. [Downloadable!] (restricted)
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  3. Stigler, George J, 1970. "The Optimum Enforcement of Laws," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 526-36, May-June. [Downloadable!] (restricted)
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  4. Steven Shavell, 1989. "Specific Versus General Enforcement of Law," NBER Working Papers 3062, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Møllgaard, Peter, 2002. "Must Trust Bust?," Working Papers 02-2002, Copenhagen Business School, Department of Economics. [Downloadable!]
  2. Thierry Penard & Saïd Souam, 2002. "Collusion et politique de la concurrence en information asymétrique," Annales d'Economie et de Statistique, ADRES, issue 66, pages 09, Avril-Jui. [Downloadable!]
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  3. John K. Stranlund & Carlos A. Chavez & Mauricio G. Villena, 2007. "The Optimal Pricing of Pollution When Enforcement is Costly," Working Papers 2007-6, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
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  4. John K. Stranlund, 2006. "The Regulatory Choice of Noncompliance in Emissions Trading Programs," Working Papers 2006-7, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
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  5. Keith N. Hylton & Haizhen Lin, 2008. "Innovation and Optimal Punishment, with Antitrust Applications," Working Papers 2008-09, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  6. Alexander E. Saak, 2002. "Identity Preservation and False Labeling in the Food Supply Chain," Center for Agricultural and Rural Development (CARD) Publications 02-wp295, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  7. Nuno Garoupa, 1997. "The Economics of Organized Crime and Optimal Law Enforcement," Economics Working Papers 246, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1997. [Downloadable!]
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  8. Marette, Stéphan, 2005. "Inspection Intensity and Market Structure," Staff General Research Papers 12451, Iowa State University, Department of Economics. [Downloadable!]
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  9. Arguedas, Carmen & Rousseau, Sandra, 2009. "A Note on the Complementarity of Uniform Emission Standards and Monitoring Strategies," Working Papers in Economic Theory 2009/06, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
  10. Saak, Alexander E., 2002. "Identity Preservation and False Labeling in the Food Supply Chain," Staff General Research Papers 2062, Iowa State University, Department of Economics. [Downloadable!]
  11. Ogus, Anthony, 2005. "Towards Appropriate Institutional Arrangements for Regulation in Less Developed Countries," Centre on Regulation and Competition (CRC) Working papers 30644, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
  12. Alexander E. Saak, 2002. "Identity Preservation and False Labeling in the Food Supply Chain," Food and Agricultural Policy Research Institute (FAPRI) Publications 02-wp295, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
  13. Anna Rita Germani, 2007. "The Environmental Enforcement in the Civil and the Common Law Systems. A Case on the Economic Effects of Legal Institutions," Quaderni DSEMS 22-2007, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia. [Downloadable!]
  14. Dominique Demougin & Claude Fluet, 1999. "Costly Sanctions and the Maximum Penalty Principle," Cahiers de recherche CREFE / CREFE Working Papers 100, CREFE, Université du Québec à Montréal. [Downloadable!]
  15. Arguedas, Carmen, 2005. "Pollution standards, costly monitoring and fines," Discussion Paper 9, Tilburg University, Center for Economic Research. [Downloadable!]
  16. Emma Aisbett & Larry Karp & Carol McAusland, 2008. "Police-powers, regulatory takings and the efficient compensation of domestic and foreign investors," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 1061, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
  17. Thomas A. Garrett & Gary A. Wagner, 2007. "Red ink in the rearview mirror: local fiscal conditions and the issuance of traffic tickets," Working Papers 2006-048, Federal Reserve Bank of St. Louis. [Downloadable!]
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  18. Carmen Arguedas, 2008. "To Comply or Not To Comply? Pollution Standard Setting Under Costly Monitoring and Sanctioning," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(2), pages 155-168, October. [Downloadable!] (restricted)
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  19. Makowsky, Michael & Thomas, Stratmann, 2008. "More Tickets, Fewer Accidents: How Cash-Strapped Towns Make for Safer Roads," MPRA Paper 14360, University Library of Munich, Germany. [Downloadable!]
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  20. Arguedas, Carmen, 2005. "Optimal environmental standards under asymmetric information and imperfect enforcement," Discussion Paper 10, Tilburg University, Center for Economic Research. [Downloadable!]
  21. Dietrich Earnhart, 1998. "Civil Litigation, Access to Government-Held Information, and Coordination of Public and Private Enforcement in the Czech Republic," European Journal of Law and Economics, Springer, vol. 6(2), pages 113-141, September. [Downloadable!] (restricted)
  22. Nuno Garoupa, 2000. "Optimal Magnitude and Probability of Fines," Economics Working Papers 454, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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