Enforcement Costs and the Optimal Magnitude and Probability of Fines
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.
|Date of creation:||Sep 1990|
|Date of revision:|
|Publication status:||published as Journal of Law and Economics, Vol. 35, No. 1, (April 1992), pp.133-148|
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National Bureau of Economic Research, Inc.
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