Working Paper: NBER ID: w25095
Authors: Claudia M. Landeo; Kathryn E. Spier
Abstract: This paper studies the design of enforcement policies to detect and deter harmful short-term activities committed by groups of injurers. With an ordered-leniency policy, the degree of leniency granted to an injurer who self-reports depends on his or her position in the self-reporting queue. By creating a "race to the courthouse," ordered-leniency policies lead to faster detection and stronger deterrence of illegal activities. The socially-optimal level of deterrence can be obtained at zero cost when the externalities associated with the harmful activities are not too high. Without leniency for self-reporting, the enforcement cost is strictly positive and there is underdeterrence of harmful activities relative to the first-best level. Hence, ordered-leniency policies are welfare improving. Our findings for environments with groups of injurers complement Kaplow and Shavell's (1994) results for single-injurer environments.
Keywords: law enforcement; ordered leniency; deterrence; self-reporting; social welfare
JEL Codes: C72; D86; K10; L23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ordered-leniency policies (L42) | likelihood of detection (C52) |
| ordered-leniency policies (L42) | deterrence of harmful activities (K42) |
| ordered-leniency policies (L42) | expected fines (G18) |
| ordered-leniency policies (L42) | social welfare (I38) |
| self-reporting behavior (C91) | likelihood of detection (C52) |
| ordered-leniency policies (L42) | enforcement costs (K40) |
| enforcement costs (K40) | underdeterrence (K42) |
| enforcement costs (K40) | expected fines (G18) |
| ordered-leniency policies (L42) | cascade of reduced sanctions (F51) |
| cascade of reduced sanctions (F51) | self-reporting behavior (C91) |
| refinement criterion for equilibrium selection (C62) | outcomes of leniency policy (K40) |