On the interplay of public and private law enforcement with multiple victims

We analyze the interplay of public and private law enforcement when an infringement affects multiple parties, and where detection by just one party is sufficient to avoid the harm. Detection causes a positive externality on other victims, so that private effort incentives are inefficiently low. The...

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Bibliographic Details
Published in:European journal of law and economics 2015-02, Vol.39 (1), p.79-95
Main Author: Feess, Eberhard
Format: Article
Language:English
Subjects:
Antitrust
Cartels
Commercial Law
Competition policy
Costs
Deterrence
Economics
Economics and Finance
Equilibrium
European Integration
Incentives
Inspections
Law
Law and Economics
Law enforcement
Public Finance
Studies
Victims
Victims of crime
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Summary:We analyze the interplay of public and private law enforcement when an infringement affects multiple parties, and where detection by just one party is sufficient to avoid the harm. Detection causes a positive externality on other victims, so that private effort incentives are inefficiently low. The public agency has might reduce its own inspection frequency in order to increase the number of private inspections (Peltzman-effect). However, due to the private parties’ incentive compatibility constraints, the agency can only trigger inspection by one more private party compared to the number of inspections when itself inspects with full frequency. Inspecting with full frequency is more likely to be second-best when the number of private parties affected is high.
ISSN:0929-1261
1572-9990
1572-9346
DOI:10.1007/s10657-014-9457-9