Fines, Appeals and Liability in Public Enforcement with Stochastic Damage and Asymmetric Information

Bibliographic Data

ID9727287
AuthorsRobert Innes (0000-0002-0805-4113, University of Arizona, corresponding author)
Year2004
Volume71
Issue283
Pages391-416
Publication date2004-08-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/j.0013-0427.2004.00377.x
OpenAlexW2002361967
LanguageEN
Citations received1
References cited28

This paper studies an enforcement game between a regulator and firms that can cause harmful accidents. The distribution of potential accident damage is private information to the firms, and realized damage can be observed only at the cost of going to court. Under conditions described in the paper, an optimal policy involves the separate assessment of regulatory/settlement fines and court liability. In this optimum, injurers self‐select by appealing (or not) to the court process; liability takes a ‘threshold’ form, assessing maximal liability when damages are high and zero liability otherwise; and, vis‐à‐vis a first‐best, some firms are over‐deterred—and others under‐deterred—from having accidents

Actuarial science · Business · Closing (real estate) · Computer security · Damages · Enforcement · Liability · Payment · Political science · Private information retrieval · Settlement (finance) · Strict liability · Computer Science · Finance · Law · Law, Economics, and Judicial Systems · Legal and Constitutional Studies · Regulation and Compliance Studies

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