Paper #401

Títol:

Optimal law enforcement under asymmetric information

Autors:

Mohamed Jellal i Nuno Garoupa

Data:

Juny 1999

Resum:

In 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.

Paraules clau:

Fine, probability of detection, asymmetry of information

Codis JEL:

K4

Àrea de Recerca:

Economia de l'Empresa i Organització Industrial

Publicat a:

European Journal of Law and Economics, 14, 1 (2002), pp. 5-13

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