Optimal law enforcement under asymmetric information
AbstractIn this paper, we focus on the problem created by asymmetric information about the enforcer's (agent's) costs associated to enforcement expenditure. This adverse selection problem affects optimal law enforcement because a low cost enforcer may conceal its information by imitating a high cost enforcer, and must then be given a compensation to be induced to reveal its true costs. The government faces a trade-off between minimizing the enforcer's compensation and maximizing the net surplus of harmful acts. As a consequence, the probability of apprehension and punishment is usually reduced leading to more offenses being committed. We show that asymmetry of information does not affect law enforcement as long as raising public funds is costless. The consideration of costly raising of public funds permits to establish the positive correlation between asymmetry of information between government and enforcers and the crime rate.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 401.
Date of creation: Jun 1999
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Web page: http://www.econ.upf.edu/
Fine; probability of detection; asymmetry of information;
Find related papers by JEL classification:
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-03-06 (All new papers)
- NEP-IND-2000-03-06 (Industrial Organization)
- NEP-LAW-2000-03-06 (Law & Economics)
- NEP-MIC-2000-03-06 (Microeconomics)
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.:
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