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Setting standards for credible compliance and law enforcement

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  • Marcel Boyer
  • Tracy R. Lewis
  • Wei Lin Liu

Abstract

In this paper we examine the setting of optimal legal standards to simultaneously induce parties to invest in care and to motivate law enforcers to detect violators of the law. The strategic interaction between care providers and law enforcers determines the degree of efficiency achieved by the standards. Our principal finding is that some divergence between the marginal benefits and marginal costs of providing care is required to control enforcement costs. Further, the setting of standards may effectively substitute for the setting of fines when penalties for violation are fixed. In particular, maximal fines may be welfare reducing when standards are set optimally.

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  • Marcel Boyer & Tracy R. Lewis & Wei Lin Liu, 2000. "Setting standards for credible compliance and law enforcement," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 319-340, May.
    • Handle: RePEc:cje:issued:v:33:y:2000:i:2:p:319-340
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    Citations

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    Cited by:

    1. BOYER, Marcel & PORRINI, Donatella, 2010. "Optimal Liability Sharing and Court Errors : An Exploratory Analysis," Cahiers de recherche 05-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    2. Marcel Boyer & Thomas W. Ross & Ralph A. Winter, 2017. "The rise of economics in competition policy: A Canadian perspective," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1489-1524, December.
    3. Marcel Boyer & Donatella Porrini, 2007. "Sharing Liability Between Banks and Firms: The Case of Industrial Safety Risk," CIRANO Working Papers 2007s-04, CIRANO.
    4. Nuno Garoupa, 2004. "Dynamic Law Enforcement with Learning," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(1), pages 192-206, April.
    5. Boyer, Marcel & Porrini, Donatella, 2011. "The impact of court errors on liability sharing and safety regulation for environmental/industrial accidents," International Review of Law and Economics, Elsevier, vol. 31(1), pages 21-29, March.
    6. Marcel Boyer & Donatella Porrini, 2004. "Modelling the choice between regulation and liability in terms of social welfare," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 590-612, August.
    7. Marie-Laure Allain & Marcel Boyer & Jean-Pierre Ponssard & Rachidi Kotchoni, 2011. "The Determination of Optimal Fines in Cartel Cases - The Myth of Underdeterrence," CIRANO Working Papers 2011s-34, CIRANO.
    8. Boyer, Marcel, 2020. "L’économie des organisations : Mythes et réalités," L'Actualité Economique, Société Canadienne de Science Economique, vol. 96(4), pages 471-498, Décembre.
    9. Boyer, Marcel, 1996. "L’économie des organisations," L'Actualité Economique, Société Canadienne de Science Economique, vol. 72(3), pages 247-274, septembre.
    10. Marcel Boyer & Donatella Porrini, 2000. "Law versus Regulation: A Political Economy Model of Instrument Choice in Environmental Policy," CIRANO Working Papers 2000s-57, CIRANO.
    11. Erica L. Plambeck & Terry A. Taylor, 2019. "Testing by Competitors in Enforcement of Product Standards," Management Science, INFORMS, vol. 65(4), pages 1735-1751, April.
    12. Allain, Marie-Laure & Boyer, Marcel & Kotchoni, Rachidi & Ponssard, Jean-Pierre, 2015. "Are cartel fines optimal? Theory and evidence from the European Union," International Review of Law and Economics, Elsevier, vol. 42(C), pages 38-47.
    13. Motta, Alberto & Burlando, Alfredo, 2007. "Self reporting reduces corruption in law enforcement," MPRA Paper 5332, University Library of Munich, Germany, revised 23 Jun 2007.
    14. Marceau, Nicolas & Mongrain, Steeve, 1999. "Dissuader le crime : un survol," L'Actualité Economique, Société Canadienne de Science Economique, vol. 75(1), pages 123-147, mars-juin.
    15. Bhole, Bharat, 2007. "Due-care standards in a market setting with legal error," International Review of Law and Economics, Elsevier, vol. 27(2), pages 154-169.
    16. Goeschl, Timo & Jürgens, Ole, 2012. "Explaining uniformity in rule design: The role of citizen participation in enforcement," International Review of Law and Economics, Elsevier, vol. 32(1), pages 166-177.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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