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14 Eur. J.L. & Econ. 5 (2002)

handle is hein.journals/eurjlwec14 and id is 1 raw text is: European Journal of Law and Economics, 14: 5-13, 2002 @ 2002 Kluwer Academic Publishers. Manufactured in The Netherlands. A Note on Optimal Law Enforcement under Asymmetric Information NUNO GAROUPA ngaroupa@fe.unl.pt Faculdade de Economia, Universidade Nova de Lisboa, Campus de Campolide, 1099-032 Lisbon, Portugal; CEPR, London MOHAMED JELLAL Toulouse Business School, 20 Boulevard Lasrosses BP 7010, 31068 Toulouse, France and GREI, Centre d'tudes Strategiques, Universite Mohammed V, Rabat, Morocco Abstract We show that the probability of apprehension and punishment is usually reduced in a framework with asymmetric information, leading to more offenses being committed. A positive correlation between crime and asymmetry of information in the enforcement process is established. Some suggestions concerning the efficiency of private versus public enforcement are drawn. Keywords: fine, probability of detection, asymmetry of information JEL Classification: K4 1. Introduction Asymmetry of information between the government and a public enforcer as well as its impact on the cost structure of enforcement has not been discussed in the literature. Most models of law enforcement, since Becker (1968), assume symmetric information between government and enforcers. That corresponds to an ideal public law enforcement context as described by Landes and Posner (1975). Realistically, public enforcement is not decided by a single actor, but by different agents, in particular, public enforcers and a government. An enforcement agency is more likely to have a comparative advantage in enforcement (detection and investigation) than the government. Through its operating activities, the agency obtains private information; information that is not available to the government (the principal). This information asymmetry poses a serious problem of implementing an optimal enforcement policy (within the public enforcement model). The existence of asymmetry of information between enforcers and the government causes the usual problem of regulating any bureaucracy: it could be that some resources are taken out of enforcement activities to be spent in other activities that generate more utility to enforcers (promoting their careers or selecting enforcement areas they want to target for other reasons than social well-being); it could be that enforcers appropriate part of the (public) enforcement budget for private reasons.1

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