Working Paper: NBER ID: w4079
Authors: Lucian Arye Bebchuk; Louis Kaplow
Abstract: This paper considers optimal enforcement when individuals may be imperfectly informed about the probability of apprehension. When individuals are perfectly informed, optimal sanctions are maximal because, as Gary Becker (1968) suggested, society can economize on enforcement resources by reducing the probability of apprehension while increasing sanctions. But when individuals imperfectly observe the probability of apprehension, it may be optimal to apply lower sanctions while expending more enforcement resources.
Keywords: Optimal sanctions; Probability of apprehension; Enforcement policy
JEL Codes: K42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| imperfect information about probability of apprehension (D80) | optimal sanctions not at highest feasible level (H21) |
| error in observing probability (C83) | expected sanction (K40) |
| raising probability of apprehension + lowering sanctions (K42) | improved behavior and welfare (I31) |
| distribution of individuals' perceptions of p (C46) | optimal choice of p and s (P00) |
| optimal choice of p and s (P00) | reduce overall welfare losses due to over and underdeterrence (D69) |