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Optimal Discretion in the Application of Rules

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  • Steven Shavell

Abstract

Discretion is examined as a feature of the design of rule-guided systems. That is, given that rules have to be administered by some group of persons, called adjudicators, and given that their goals may be different from society's (or a relevant organization's), when is it socially desirable to allocate discretionary authority to the adjudicators and, if so, to what extent? The answer reflects a tradeoff between the informational advantage of discretion—that adjudicators can act on information not included in rules—and the disadvantage of discretion—that decisions may deviate from the desirable because adjudicators' objectives are different from society's. The control of discretion through limitation of its scope, through decision-based payments to adjudicators, and through the appeals process, is also considered. Copyright 2007, Oxford University Press.

Suggested Citation

  • Steven Shavell, 2007. "Optimal Discretion in the Application of Rules," American Law and Economics Review, Oxford University Press, vol. 9(1), pages 175-194.
  • Handle: RePEc:oup:amlawe:v:9:y:2007:i:1:p:175-194
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    File URL: http://hdl.handle.net/10.1093/aler/ahm004
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    References listed on IDEAS

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    1. Shavell, Steven, 1987. "The Optimal Use of Nonmonetary Sanctions as a Deterrent," American Economic Review, American Economic Association, vol. 77(4), pages 584-592, September.
    2. Jefferson, Philip N. & Pryor, Frederic L., 1999. "On the geography of hate," Economics Letters, Elsevier, vol. 65(3), pages 389-395, December.
    3. Nuno Garoupa, 2001. "Optimal law enforcement when victims are rational players," Economics of Governance, Springer, vol. 2(3), pages 231-242, November.
    4. Polinsky, A Mitchell & Shavell, Steven, 1999. "On the Disutility and Discounting of Imprisonment and the Theory of Deterrence," The Journal of Legal Studies, University of Chicago Press, vol. 28(1), pages 1-16, January.
    5. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
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    Cited by:

    1. Leonardo Felli & Alessandro Riboni & Luca Anderlini, 2007. "Statute Law or Case Law?," 2007 Meeting Papers 952, Society for Economic Dynamics.
    2. Rousseau, Sandra & Telle, Kjetil, 2010. "On the existence of the optimal fine for environmental crime," International Review of Law and Economics, Elsevier, vol. 30(4), pages 329-337, December.
    3. Mialon, Hugo M. & Mialon, Sue H. & Stinchcombe, Maxwell B., 2012. "Torture in counterterrorism: Agency incentives and slippery slopes," Journal of Public Economics, Elsevier, vol. 96(1), pages 33-41.
    4. Wohlschlegel, Ansgar, 2014. "The Appeals Process and Incentives to Settle," MPRA Paper 59424, University Library of Munich, Germany.
    5. Mosk, T.C., 2014. "Essays on banking," Other publications TiSEM d424ec24-1bfd-4be0-b19a-3, Tilburg University, School of Economics and Management.
    6. Hadfield, Gillian K., 2011. "The dynamic quality of law: The role of judicial incentives and legal human capital in the adaptation of law," Journal of Economic Behavior & Organization, Elsevier, vol. 79(1-2), pages 80-94, June.
    7. Lundberg, Alexander, 2016. "Sentencing discretion and burdens of proof," International Review of Law and Economics, Elsevier, vol. 46(C), pages 34-42.
    8. Robin Christmann, 2014. "No Judge, No Job! Court errors and the contingent labor contract," European Journal of Law and Economics, Springer, vol. 38(3), pages 409-429, December.

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