The result derives from the relative impacts of the probability of detec- tion versus the severity of formal sanctions. [...] With respect to detection e¤ort, the rst-order condition is @F (b̂(p; s))(h+ kps b̂) = ks[1 F (b̂)] + c0(p) (21) @p The right-hand side is the sum of the extra punishment and detection costs from an increase in the probability of detection. [...] We explain here how the incorporation of reputational concerns aligns the enforcement model with this presumption, and relate the gap between the p and selasiticities of crime to the size of reputational sanctions. [...] To increase deterrence even further (say, following an exogenous increase in the harm- fulness of o¤enses), the optimal policy is then to invest less in detection and to strengthen the severity of the sanction. [...] In the situation described in the proposition, the law is enforced only for the purpose of creating reputational incentives, hence the trade-o¤ between 15 detection costs and deterrence benets in (32).
Authors
- Pages
- 21
- Published in
- Canada
