This paper shows that increasing the sanction on collective crime may increase its prevalence. This situation arises when individuals can commit crimes both individually and as part of a collective. Our result is based on an interdependence between detection probabilities where detection of an...

The literature argues that if injurers cannot anticipate the precise level of harm, courts might use expected harm as a magnitude of compensation instead of actual harm without distorting care incentives. This paper shows that the use of expected harm is in fact preferable if victims choose the...

This paper considers the tax evasion decision when taxes constitute contributions to the financing of social insurance programs, such as un employment insurance. We call this evasion contribution evasion and establish that critical differences exist between contribution evasion and tax evasion,...

This paper establishes within an intertemporal framework that firm activity is influenced by tax evasion if firms can invest in their long-term competitiveness. Higher investment raises the firm's survival probability, which in turn reduces tax-evasion payoffs, since evaded taxes may also be...

This paper considers victim heterogeneity in harm levels in a bilateral-care model, where harm is private information. In practice, resources are expended on the verification of damages suffered. We establish a sufficient condition for the possibility to accurately deduce the harm level from the...

Offenders differ with respect to their detection probability in reality. Bebchuk and Kaplow [Bebchuk, L. A., & Kaplow, L. (1993). Optimal sanctions and differences in individuals’ likelihood of avoiding detection. International Review of Law and Economics, 13, 217–224] conclude that optimal...

The severity of the sanction for a given offense is often determined by the offense history of the offender. We establish that this policy can be welfare-maximizing if individuals are imperfectly informed about the magnitude of the sanction. Imperfect information distorts individuals’...

This paper analyzes care incentives of individuals in a bilateral-harm setting if care choices are sequential. We find that the efficient outcome is not guaranteed under any liability rule considered, irrespective of whether information is perfect or imperfect. Furthermore, it is no longer...

The inspection game as formulated by Tsebelis (Am. Polit. Sci. Rev. 83:77–91, 1989) has the counterintuitive implication that crime is unaffected by the magnitude of the penalty. This paper demonstrates that to attain this outcome, it is necessary to assume independence of enforcer and offender...