We consider a model in which a regulator determines the level of an activity – which is harmful to society – beyond which an agent will pay a fixed fine. We show that the regulator adopts a random punishment scheme under certain conditions in order to minimize harm. The results may help to solve the puzzle of why vague enforcement policies are implemented by competent governments even when tough enforcement is possible and costless.
- Law enforcement
- Random strategy
All Science Journal Classification (ASJC) codes
- Economics and Econometrics