Optimal Law Enforcement with Ordered Leniency
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.
Landeo, Claudia M. and Spier, Kathryn E.
"Optimal Law Enforcement with Ordered Leniency,"
Journal of Law and Economics: Vol. 63:
1, Article 3.
Available at: https://chicagounbound.uchicago.edu/jle/vol63/iss1/3