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Optimal Law Enforcement with Ordered Leniency

Author

Listed:
  • Claudia M. Landeo
  • Kathryn E. Spier

Abstract

This paper studies the design of optimal enforcement policies with ordered leniency to detect and deter harmful short-term activities committed by groups of injurers. With ordered leniency, the degree of leniency granted to an injurer who self-reports depends on his or her position in the self-reporting queue. We show that the ordered-leniency policy that induces maximal deterrence gives successively larger discounts to injurers who secure higher positions in the reporting queue. This creates a so-called race to the courthouse in which all injurers self-report promptly and, as a result, social harm is reduced. We show that the expected fine increases with the size of the group, which thus discourages the formation of large illegal enterprises. The first-best outcome is obtained with ordered leniency when the externalities associated with the harmful activities are not too great. Our findings complement Kaplow and Shavell’s results for single-injurer environments.

Suggested Citation

  • Claudia M. Landeo & Kathryn E. Spier, 2020. "Optimal Law Enforcement with Ordered Leniency," Journal of Law and Economics, University of Chicago Press, vol. 63(1), pages 71-111.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/705829
    DOI: 10.1086/705829
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    Cited by:

    1. Emmanuelle Auriol & Erling Hjelmeng & Tina Søreide, 2023. "Corporate criminals in a market context: enforcement and optimal sanctions," European Journal of Law and Economics, Springer, vol. 56(2), pages 225-287, October.
    2. Emilie Dargaud & Armel Jacques, 2020. "Slowdown antitrust investigations by decentralization," Working Papers halshs-02613352, HAL.
    3. Giovanni Immordino & Salvatore Piccolo & Paolo Roberti, 2018. "Criminal Networks, Market Externalities and Optimal Leniency," CSEF Working Papers 519, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    4. Iwasaki, Masaki, 2020. "A model of corporate self-policing and self-reporting," International Review of Law and Economics, Elsevier, vol. 63(C).
    5. Giovanni Immordino & Salvatore Piccolo & Paolo Roberti, 2024. "Criminal network, leniency, and market externalities," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(4), August.
    6. Andres, Maximilian & Bruttel, Lisa & Friedrichsen, Jana, 2021. "The leniency rule revisited: Experiments on cartel formation with open communication," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 76, pages 1-1.
    7. Claudia Landeo & Kathryn Spier, 2018. "Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting," Working Papers 2018-13, University of Alberta, Department of Economics.
    8. Sheng, Dian & Wang, YiYao & Wang, Hua & Liu, Baoli & Tang, Tianpei, 2024. "Enforcement of the global sulphur cap: Can self-reporting provide a better solution?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 184(C).
    9. Ruben Korsten & Andrew Samuel, 2023. "Cartel formation and detection: the role of information costs and disclosure," European Journal of Law and Economics, Springer, vol. 56(1), pages 117-153, August.
    10. Immordino, Giovanni & Piccolo, Salvatore & Roberti, Paolo, 2020. "Optimal leniency and the organization design of group crime," Journal of Public Economics, Elsevier, vol. 191(C).

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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