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Flexible enforcement and fine adjustment

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  • Christopher S. Decker

Abstract

This paper considers the level of, and changes in, optimal noncompliance penalties under the following conditions: (i) where the regulator responsible for setting policy parameters, such as a penalty, is different from (and thus may have a different objective from) the regulator responsible for enforcing existing regulations; and (ii) where enforcement behavior changes from one in which enforcers are unresponsive to overtures on the part of firms to increase compliance to one in which enforcers are responsive to such overtures. The model developed shows that when enforcers “switch” from unresponsive to responsive enforcement, the optimal penalties for noncompliance need to be reduced. The analysis also gives insights as to what variables dictate the degree of penalty reduction.

Suggested Citation

  • Christopher S. Decker, 2007. "Flexible enforcement and fine adjustment," Regulation & Governance, John Wiley & Sons, vol. 1(4), pages 312-328, December.
    • Handle: RePEc:wly:reggov:v:1:y:2007:i:4:p:312-328
    DOI: 10.1111/j.1748-5991.2007.00019.x
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    References listed on IDEAS

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