Skip to main content
Log in

Discretionary enforcement and strategic interactions between enforcement agencies and firms: a theoretical and laboratory investigation

  • Original Article
  • Published:
Journal of Regulatory Economics Aims and scope Submit manuscript

Abstract

This paper presents a game theoretic morphological analysis of the strategic interactions between environmental enforcement authorities and polluting firms. The models explore the role of discretion that such authorities enjoy, either in deciding how to pursue environmental violations (investigative and prosecutorial discretion) or in judging them (judicial discretion). The purpose is to identify both the optimal firms’ behaviour in terms of compliance, and the enforcement authorities’ optimal strategies in terms of enforcement actions to undertake. Consistent with the setting of the game theoretic models, the role of the enforcement agencies in deterring firms from polluting is, then, empirically tested by means of laboratory experiments. Laboratory evidence on compliance behaviour of firms when faced with enforcement conditions predicted by the theoretical models set up is discussed for the different experimental treatments performed. Overall, we suggest that making environmental enforcement less predictable for the firms, and thus creating a degree of uncertainty for the violators, can actually encourage deterrence and, thus, improve compliance. Thus, a partly unpredictable enforcement strategy may generate more compliance than an environmental policy that is known with certainty in advance.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Notes

  1. In 1984, the U.S. Congress passed the Sentencing Reform Act (SRA) that completely transformed the traditional sentencing process in an attempt to reduce unwarranted disparity in sentencing, to ensure certainty, proportionality and uniformity of punishment, and to establish more serious penalties for specific categories of offenses. In order to achieve these goals, Congress created the United States Sentencing Commission as an independent, permanent agency in the judicial branch with the main purpose to develop an unprecedented body of laws to regulate federal sentencing: the Federal Sentencing Guidelines. The Sentencing Guidelines went into effect in November 1987, and apply to all federal crimes committed on or after that date.

  2. It should be noted that in some jurisdictions, the enforcement agency is fragmented (as in Italy and Belgium, in Europe) with regard to investigation and monitoring (Svatikova 2011) and the incentives of the delegated or decentralized agents might differ from those of the central agency (Linder and McBride 1984).

  3. Holler’s (1993) assumptions with respect to the payoffs are the followings: assumption (1) if the agency inspects the polluter, the polluter prefers to comply; assumption (2) if the agency does not inspect the polluter, the polluter prefers not to comply; assumption (3) if the polluter does not comply, the agency prefers to inspect the polluter; assumption (4) if the polluter complies, the agency prefers not to inspect the polluter.

  4. EPA (2016) concluded 1360 administrative penalty orders complaints in FY2016, https://www.epa.gov/enforcement/enforcement-annual-results-numbers-glance-fiscal-year-2016.

  5. EPA referred 152 civil cases in FY2016 (EPA 2016).

  6. EPA reported the assessment of nearly $5.8 billion in civil penalties (administrative and judicial) and more than $207 billion in combined criminal fines, restitution, and court-ordered environmental projects during FY2016. Criminal fines and restitution punish misconduct, deter other violators and, along with court- ordered environmental projects, help to remedy the harm caused by the criminal conduct. Criminal results, in recent years, have been dominated by two very large cases: BP Deepwater Horizon, resolved in 2013, and Duke Energy coal ash spill, resolved in 2015.

  7. For example, the U.S. Environmental Protection Agency (EPA) has a comprehensive regulatory and enforcement role and can impose penalties up to $10,000 per day, within a maximum of $125,000 on anyone discharging pollutants into a river in violation of the Clean Water Act (CWA). In turn, these regulatory violations are also held criminal offences, and consequently subject to criminal punishment (fines or imprisonment) decided and enforced by the courts.

  8. Firestone’s (2003) main results are that when EPA seeks to (i) maximize social welfare, (ii) minimize the number of violations, or (iii) maximize political benefits, it would find judicial remedies less attractive and thus increasingly will choose to handle violations administratively. Only when EPA seeks to minimize environmental harm, as the actual or potential for harm increases, it would invest greater financial resources to punish the conduct criminally.

  9. Some of the justifications for assuming an upper bound for the feasible fine are: (i) financial constraints on the side of the firm lead to reasonable fines in order to avoid bankruptcy; (ii) the “punishment fits the crime” principle (Michael 1992) requires that the severity of penalty for a wrongdoing should be reasonable and proportionate to the severity of the infraction and is another reason for assuming an upper bound on the feasible fine.

  10. This is a standard property of mixed-strategy Nash equilibrium, since the objective function is linear in the probability.

  11. As noted by Firestone (2003), administrative and civil judicial enforcement share many elements. The primary distinguishing characteristic is that with administrative enforcement, EPA typically functions as both the enforcer and the adjudicator. A judge or EPA, as appropriate, may impose a civil sanction in an environmental matter whenever a person has violated or is violating a law or a permit condition [see, e.g., 42 U.S.C. § 7413(a)(3) (2000)].

  12. The purpose of a NOV is to initiate corrective action that will stop the violation. To provide an incentive for continuing compliance, NOVs for the Clean Water Act may result in monetary penalties up to $27.500 per day, per violation, according to 33 U.S.C. §1319.

  13. In addition to the imposition of monetary fines and requirements to correct a violation and restore damages, conviction of a criminal environmental violation can result in imprisonment.

  14. The DOJ’s charging decision is subject to administrative guidance. Prosecution should proceed only if there is probable cause to believe such a crime has been committed and the evidence is likely to sustain a conviction (2000 United States Attorneys’ Manual, at § 9-27.200). In the decision to proceed the following seven factors are considered: (1) federal law enforcement priorities; (2) the nature and the seriousness of the offense; (3) the deterrent effect of prosecution; (4) the offender’s culpability; (5) the offender’s criminal history; (6) the offender’s willingness to cooperate; and (7) the offender’s probable sentence or other consequences of conviction (United States Attorneys’ Manual 2000, at § 9-27.200). More specifically, with regard to the decision to prosecute environmental crimes, DOJ guidelines consider the following four factors: (1) voluntary disclosure of a violation or other cooperation with the authorities; (2) the entity’s level of noncompliance; (3) the existence of preventative measures and compliance programs; and (4) whether the entity pursues its own internal disciplinary actions and produces subsequent compliance.

  15. See generally, U.S. Dept. of Justice in cooperation with the National Association of Attorneys, General Guidelines for Joint State/Federal Civil Environmental Enforcement Litigation (2003), available at http://www.naag.org/issues/pdf/env-joint_enf_guidelines-full.pdf.

  16. The U.S. DOJ considers all of the following factors in deciding whether to exercise prosecutorial discretion: voluntary, timely, and complete disclosure of the matter under investigation; the degree and timeliness of cooperation; existence and scope of any regularized, intensive, and comprehensive environmental compliance program; pervasiveness of non-compliance; effective internal disciplinary action; and efforts to remedy any on-going non-compliance promptly and completely.

  17. These conditions are highly plausible in practice in the U.S. institutional environmental enforcement system since they correspond to realistic policy options and enforcement procedures that, for several federal environmental laws, can be implemented by both the EPA and the DOJ.

  18. The experiment was conducted in 2010.

  19. 33 subjects participated when preferences were elicited using pair wise choice lotteries both in the control treatment, and in the heterogeneous treatment.

  20. A hot condition is a situation where subjects’ decisions are observe whenever decision nodes are reached. On the contrary, a cold condition is a situation in which all subjects’ decisions are observed ahead of reaching decision nodes but are actually played when and if at certain point of the game is actually reached. According to standard game-theoretic view hot and cold methods should yield the same decisions. However, Loewenstein (2005) suggested that a subject could behave differently if his/her decision is elicited under a hot or cold scheme. Roth (1995) presents a short discussion of potentially relevant issues. However, as pointed out in Brandts and Charness (2000) there is no clear consensus among practitioners about it.

  21. \(k_{c}\) is the cost to DOJ of enforcing civil prosecution, \(k_{j}\) the cost of enforcing criminal prosecution, and finally r is the reputation cost of letting off an offending firm with only a fine.

  22. The clean-up costs for the firm when it is not compliant and it is forced to clean up by DOJ (\(c_{2}\)) are greater than the clean-up costs if it is compliant (\(c_{1}\)).

  23. Testing hot versus cold we cannot reject the null hypothesis at any significance level; testing hot (cold) versus pairwise choice gamble we reject the null hypothesis at a 5% (11%) significance level.

  24. Note that, although in the experiment instructions it was clearly stated that subjects should have made a decision every time they reached a node followed by dotted lines, only 16 subjects (out of 32) expressed their choices on the whole game tree.

  25. U.S. EPA, Compliance and enforcement annual results (various years).

  26. The application of civil sanctions, generally, includes fines, negative publicity and installation of pollution-control technology, while the application of criminal sanctions includes also fine and imprisonment. The main distinction between sanctions in the criminal and civil systems is the availability of criminal non-monetary sanctions, such as incarceration and probation.

References

  • Abbot, C. (2005). The regulatory enforcement of pollution control laws. Journal of Environmental Law, 17(2), 161–180.

    Article  Google Scholar 

  • Abbot, C. (2009). Enforcing Pollution control regulation—strengthening sanctions and improving deterrence. London: Hart.

    Google Scholar 

  • Anderson, L. R., & Stafford, S. L. (2003). Punishment in a regulatory setting: Experimental evidence from the VCM. Journal of Regulatory Economics, 24(1), 91–110.

    Article  Google Scholar 

  • Ayres, I., & Braithwaite, J. (1992). Responsive regulation: Transcending the deregulation debate. Oxford: Oxford University Press.

    Google Scholar 

  • Babbit, C. J., Cory, D. C., & Kruchek, B. L. (2004). Discretion and the criminalization of environmental law. Duke Environmental Law and Policy Forum, 15, 1.

    Google Scholar 

  • Barker, D. A. (2002). Environmental crimes, prosecutorial discretion, and the civil/criminal line. Virginia Law Review, 88, 1387.

    Article  Google Scholar 

  • Becker, G. S. (1968). Crime and punishment: An economic approach. Journal of Political Economy, 76, 69–217.

    Article  Google Scholar 

  • Becker, G., & Stigle, G. (1974). Law enforcement, malfeasance, and compensation of enforcers. Journal of Legal Studies, 3(1), 1–18.

    Article  Google Scholar 

  • Baker, T., Harel, A., & Kugler, T. (2004). The virtues of uncertainty in law: An experimental approach. Iowa Law Review, 89, 443–494.

    Google Scholar 

  • Billiet, C. M. (2012). Satellite images as evidence for environmental crime in Europe. A judges perspective. In R. Purdy & D. Leung (Eds.), Evidence from earth observation satellites. Emerging legal issues. Leiden: Brill.

    Google Scholar 

  • Blondiau, T., Billiet, C. M., & Rousseau, S. (2015). Comparison of criminal and administrative penalties for environmental offenses. European Journal of Law and Economics, 39(1), 11–35.

    Article  Google Scholar 

  • Blondiau, T., & Rousseau, S. (2010). The impact of the judicial objective function on the enforcement of environmental standards. Journal of Regulatory Economics, 37(2), 196–214.

    Article  Google Scholar 

  • Bowles, R., Faure, M. G., & Garoupa, N. (2008). The scope of criminal law and criminal sanctions: An economic view and policy implications. Journal of Law and Society, 35, 389.

    Article  Google Scholar 

  • Brandts, J., & Charness, G. (2000). Hot vs. cold: Sequential responses and preference stability in experimental games. Experimental Economics, 2(3), 227–238.

    Article  Google Scholar 

  • Clifford, R. (2007). Shining the spotlight on european union environmental compliance. Pace Environmental Law Review, 24 (1), http://digitalcommons.pace.edu/pelr/vol24/iss1/7.

  • Coffee, J. C. (1991). Does unlawful mean criminal?: Reflections on the disappearing tort/crime distinction in american law. Boston University Law Review, 71, 193.

    Google Scholar 

  • Cohen, M. (1999). Monitoring and enforcement of environmental policy. In T. Tietenberg & H. Folmer (Eds.), International yearbook of environmental and resource economics 1999/2000 (Vol. III, pp. 44–106). Northampton, MA: Edward Elgar Publishers.

    Google Scholar 

  • Cohen, M. (2000). Empirical research on the deterrent effect of environmental monitoring and enforcement. Environmental Law Report, 30, 10245–10252.

    Google Scholar 

  • Cory, C. D., & Germani, A. R. (2002). Criminal sanction for agricultural violations of the CWA. Water Policy, 4(6), 491–514.

    Article  Google Scholar 

  • Dasgupta, S., Hettig, H., & Wheeler, D. (2000). What improves compliance? Evidence from Mexican industry. Journal of Environmental Economics and Management, 39, 39–66.

    Article  Google Scholar 

  • Deily, M. E., & Gray, W. B. (2007). Agency structure and firm culture: OSHA, EPA, and the steel industry. The Journal of Law, Economics & Organization, 23(3), 685–709.

    Article  Google Scholar 

  • DiMento, J. F. (1993). Enforcement of environmental law. Annals of the American Academy of Political and Social Science, 525, 134–146.

    Article  Google Scholar 

  • Dion, C., Lanoie, P., & Laplante, B. (1998). Monitoring of pollution regulation: do local conditions matter? Journal of Regulatory Economics, 13(1), 5–18.

    Article  Google Scholar 

  • EPA (2016). Enforcement annual results numbers at a glance for fiscal year 2016. https://www.epa.gov/enforcement/enforcement-annual-results-numbers-glance-fiscal-year-2016.

  • Esworthy, R. (2014). Federal pollution control laws: How are they enforced? Congressional Research Service (CSR) report, 7-5700. https://fas.org/sgp/crs/misc/RL34384.pdf.

  • European Commission (2008). Directive 2008/99/EC on the protection of the environment through criminal law. http://ec.europa.eu/environment/legal/crime/index.htm.

  • Faure, M. G., & Johnston, J. S. (2008). The law and economics of environmental federalism: Europe and the United States Compared. Faculty Scholarship Paper 202. http://scholarship.law.upenn.edu/faculty_scholarship/202.

  • Faure, M. G., Ogus, A., & Philipsen, N. (2009). Curbing consumer financial losses: The economics of regulatory enforcement. Law & Policy, 31, 161.

    Article  Google Scholar 

  • Faure, M. G., & Svatikova, K. (2012). Criminal or administrative law to protect the environment? Evidence from Western Europe. Journal of Environmental Law, 24(2), 253–286.

    Article  Google Scholar 

  • Firestone, J. (2003). Enforcement of pollution laws and regulations: An analysis of forum choice. Harvard Environmental Law Review, 27, 105–176.

    Google Scholar 

  • Franckx, L. (2001a). Ambient environmental inspections in repeated enforcement games, working paper series n. 2001-12, Katholieke Universiteit Leuven. http://feb.kuleuven.be/drc/Economics/misc/ete_workingpapers/ete-wp01-12.pdf.

  • Franckx, L. (2001b). Ambient environmental monitoring, sequential firm inspections and time-decreasing benefits of inspection. Economic Bullettin, 17(1), 1–10.

    Google Scholar 

  • Franckx, L. (2002). The use of ambient inspections in environmental monitoring and enforcement when the inspection agency cannot commit itself to announced inspection probabilities. Journal of Environmental Economics and Management, 43(1), 71–92.

    Article  Google Scholar 

  • Frase, R. S. (1980). The decision to file federal criminal charges: A quantitative study of prosecutorial discretion. University of Chicago Law Review, 47, 246–303.

    Article  Google Scholar 

  • Friesen, L. (2003). Targeting enforcement to improve compliance with environmental regulations. Journal of Environmental Economics and Management, 46, 72–85.

    Article  Google Scholar 

  • Gaynor, K. A., & Lippard, B. S. (2002). Environmental enforcement: Industry should not be complacent. Environmental Law Reporter, 32, 10488–10504.

    Google Scholar 

  • Glaeser, E., Kessler, D., & Piehl, A. (2000). What do prosecutors maximize? An analysis of the federalization of drug crimes. American Law and Economics Review, 2, 259–290.

    Article  Google Scholar 

  • Glicksman, R., & Earnhardt, D. (2007). Depiction of the regulator-regulated entity relationship in the chemical industry: Deterrence-based v. cooperative enforcement. William and Mary Environmental Law and Policy Review, 31(3), 603–660.

    Google Scholar 

  • Gray, W. B., & Shimshack, J. P. (2011). The effectiveness of environmental monitoring and enforcement: A review of the empirical evidence. Review of Environmental Economics and Policy, 5, 3–24.

    Article  Google Scholar 

  • Green, S. P. (1997). Why it’s a crime to tear the tag off a mattress: Overcriminalization and the moral content of regulatory offenses. Emory Law Journal, 46, 1533–1615.

    Google Scholar 

  • Hampton, P. (2005). Reducing administrative burdens: Effective inspection and enforcement. Retrieved http://www.bis.gov.uk/files/file44593.pdf.

  • Harrington, W. (1988). Enforcement leverage when penalties are restricted. Journal of Public Economics, 37, 29–53.

    Article  Google Scholar 

  • Harsanyi, J. C. (1973). Games with randomly disturbed payoffs: A new rationale for mixed-strategy equilibrium payoffs. International Journal of Game Theory, 2, 1–23.

    Article  Google Scholar 

  • Helland, E. (1998). The enforcement of pollution control laws: Inspections, violations and self-reporting. Review of Economics and Statistics, 80, 141–153.

    Article  Google Scholar 

  • Hertz, M. (2011). Structures of environmental criminal enforcement. Fordham Environmental Law Review, 7(3), 678–718.

    Google Scholar 

  • Heyes, A. (1998). Making things stick: Enforcement and compliance. Oxford Review of Economic Policy, 14(4), 50–63.

    Article  Google Scholar 

  • Heyes, A. (2000). Implementing environmental regulation: Enforcement and compliance. Journal of Regulatory Economics, 17, 107–129.

    Article  Google Scholar 

  • Heyes, A., & Rickman, N. (1999). Regulatory dealing—revisiting the Harrington Paradox. Journal of Public Economics, 72, 361–378.

    Article  Google Scholar 

  • Holler, M. J. (1993). Fighting pollution when decisions are strategic. Public Choice, 76, 347–356.

    Article  Google Scholar 

  • House of Commons (2005). Government response to the committee’s second report of session 2004-05 on corporate environmental crime. Available at: http://www.parliament.the-stationery-office.com.

  • Jones, C. A., & Scotchmer, S. (1990). The Social cost of uniform regulatory standards in a hierarchical government. Journal of Environmental Economics and Management, 19, 61–72.

    Article  Google Scholar 

  • Kane, P. S. (1993). Why have you singled me out? The use of prosecutorial discretion for selective prosecution. Tulane Law Review, 67, 2293.

    Google Scholar 

  • Kleven, H. J., Knudsen, M., Knudsen, C. T., Pedersen, S., & Saez, E. (2011). Unwilling or unable to cheat? Evidence from a tax audit experiment in Denmark. Econometrica, 79(3), 651–692.

    Article  Google Scholar 

  • Krämer, L. (2002). Thirty years of EC environmental law: Perspectives and prospectives. In Yearbook of European environmental law, (vol. 2, pp. 155–182). Oxford: Oxford University Press.

  • Lando, H., & Shavell, S. (2004). The advantage of focusing law enforcement effort. International Review of Law and Economics, 24, 209–218.

    Article  Google Scholar 

  • Laplante, B., & Rilstone, P. (1996). Environmental inspections and emissions of the pulp and paper industry in Quebec. Journal of Environmental Economics and Management, 31, 19–36.

    Article  Google Scholar 

  • Linder, S. H., & McBride, M. E. (1984). Enforcement costs and regulatory reform: The agency and firm response. Journal of Environmental Economics and Management, 11(4), 327.

    Article  Google Scholar 

  • Loewenstein, G. (2005). Hot-cold empathy gaps and medical decision-making. Health Psychology, 24, S49–S56, 1366–1377.

    Article  Google Scholar 

  • Macrory, R. (2006). Regulatory justice: Making sanctions effective. Retrieved: http://www.bis.gov.uk/files/file44593.pdf.

  • Magat, W. A., & Viscusi, W. K. (1990). Effectiveness of the EPA’s regulatory enforcements: The case of industrial effluent standards. Journal of Law and Economics, 30, 331–360.

    Article  Google Scholar 

  • Michael, D. (1992). To make the punishment fit the crime: Essays in the theory of criminal justice. Boulder, CO: Westview.

    Google Scholar 

  • Mintz, J. A. (2012). Enforcement at the EPA: High stakes and hard choices (Revised ed.). Austin, TX: University of Texas Press.

    Google Scholar 

  • Morris, S. (2008). Purification. In S. N. Durlauf & L. E. Blume (Eds.), The new palgrave dictionary of economics (2nd ed.). Basingstoke: Palgrave Macmillan.

    Google Scholar 

  • Niskanen, W. A. (1975). Politicians and bureaucrats. Journal of Law and Economics, 18, 617–43.

    Article  Google Scholar 

  • Ogus, A. (2004). Enforcing regulation: Do we need the criminal law? In H. Sjogren & G. Skogh (Eds.), New Perspectives on Economic Crime. Cheltenham: Edward Elgar.

    Google Scholar 

  • Ogus, A., & Abbot, C. (2002). Sanctions for pollution: Do we have the right regime? Journal of Environmental Law, 14, 283.

    Article  Google Scholar 

  • Ordershook, P. (1986). Game theory and political theory. Cambridge, NY: Cambridge University Press.

    Book  Google Scholar 

  • Peltzman, S. (1976). Toward a more general theory of regulation. Journal of Law and Economics, 19, 211–40.

    Article  Google Scholar 

  • Polinsky, A. M., & Shavell, S. (2000). The economic theory of public enforcement of law. Journal of Economic Literature, 38, 45–74.

    Article  Google Scholar 

  • Polinsky, A. M., & Shavell, S. (2006). The theory of public enforcement of law. Amstersdam: Elsevier.

    Google Scholar 

  • Posner, R. (1993). What do judges and justices maximize? (The same thing everybody else does). Supreme Court Economic Review, 3, 1–41.

    Article  Google Scholar 

  • Rasmusen, E. (1996). Stigma and self-fulfilling expectations of criminality. Journal of Law and Economics, 39, 519–544.

    Article  Google Scholar 

  • Rasmusen, E., Raghav, M., & Ramseyer, M. (2009). Convictions versus conviction rates: The prosecutor’s choice. American Law and Economics Review, 11, 47.

    Article  Google Scholar 

  • Reinganum, J. F., & Wilde, L. L. (1986). Equilibrium verification and reporting policies in a model of tax compliance. International Economic Review, 27(3), 739–760.

    Article  Google Scholar 

  • Roth, A. (1995). Bargaining experiments. In J. Kagel & A. Roth (Eds.), Handbook of experimental economics (pp. 253–348). Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Rousseau, S. (2007). The impact of sanctions and inspections on firms’ environmental compliance decisions. Energy, transport and environment. Katholieke Universiteit Leuven, working paper series, n. 4.

  • Scholz, J. T. (1991). Cooperative regulatory enforcement and the politics of administrative effectiveness. American Political Science Review, 85, 115–136.

    Article  Google Scholar 

  • Senate, U. S. (2003). Criminal and civil enforcement of environmental laws: Do we have all the tools we need? Hearing. U.S. Governmental Printing, 107(97), 437–456.

    Google Scholar 

  • Shavell, S. (1993). The optimal structure of law enforcement. Journal of Law and Economics, 36(1), 255–287.

    Article  Google Scholar 

  • Shimshack, J. P. (2014). The economics of environmental monitoring and enforcement. Annual Review of Resource Economics, 6, 339–360.

    Article  Google Scholar 

  • Shimshack, J. P., & Ward, M. B. (2005). Regulator reputation, enforcement, and environmental compliance. Journal of Environmental Economics and Management, 50, 519–540.

    Article  Google Scholar 

  • Stafford, S. L. (2002). The effect of punishment on firm compliance with hazardous waste regulations. Journal of Environmental Economics and Management, 44, 290–308.

    Article  Google Scholar 

  • Stafford, S. L. (2003). Assessing the effectiveness of state regulation and enforcement of hazardous waste. Journal of Regulatory Economics, 23, 27–41.

    Article  Google Scholar 

  • Stigler, G. J. (1971). The theory of economic regulation. The Bell Journal of Economics and Management Science, 2, 3–21.

    Article  Google Scholar 

  • Stranlund, J. (2013). A brief review of the economics of enforcing environmental policies. In J. Shogren (Ed.), Encyclopedia of energy, natural resource, and environmental economics (vol. 2, pp. 150–155). Elsevier Science.

  • Sunstein, C. R., Kahneman, D., Schkade, D., & Ritov, I. (2002). Predictably incoherent judgments. Stanford Law Review, 54, 1153–1215.

    Article  Google Scholar 

  • Svatikova, K. (2011). Complementary use of administrative and criminal fines in enforcing environmental regulations. PhD thesis: Economic criteria for criminalization: Optimizing enforcement in case of environmental violations, Chapter 6.

  • Svatikova, K. (2012). Criminal or administrative law to protect the environment? Evidence from Western Europe. Journal of Environmental Law, 24(2), 253–286.

    Article  Google Scholar 

  • Tosun, J. (2012). Environmental monitoring and enforcement in Europe: A review of empirical research. Environmental Policy and Governance, 22, 437–448.

    Article  Google Scholar 

  • Tsebelis, G. (1989). The abuse of probability in political analysis: The Robinson Crusoe fallacy. The American Political Science Review, 83, 77–91.

    Article  Google Scholar 

  • United Nations Environment Programme. (2006). Manual on compliance with and enforcement of multilateral environmental agreements. Nairobi: UNEP.

  • U.S. EPA. Compliance and enforcement annual results, various years.

  • Viscusi, W. K., & Zeckhauser, R. J. (1979). Optimal standards with incomplete enforcement. Public Policy, 27, 437–56.

    Google Scholar 

  • Yeager, P. (1991). The limits of law: The public regulation of private pollution. Cambridge: Cambridge University Press.

    Book  Google Scholar 

Download references

Acknowledgements

The authors are grateful to Dennis Cory for having inspired this work and to Sam Fankhauser and Antonio Nicita for their valuable comments on a previous version of the paper, and seminar participants at the University of Rome “La Sapienza”, at the 10th Annual Global Conference on Environmental Taxation, Lisbon, at the 24th Annual Conference of the European Association of Law and Economics (EALE), Copenhagen, and at the 22nd Annual Conference of the European Association of Environmental and Resource Economists (EAERE), Zurich, for useful suggestions.

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Anna Rita Germani.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Germani, A.R., Scaramozzino, P., Morone, A. et al. Discretionary enforcement and strategic interactions between enforcement agencies and firms: a theoretical and laboratory investigation. J Regul Econ 52, 255–284 (2017). https://doi.org/10.1007/s11149-017-9341-y

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11149-017-9341-y

Keywords

JEL Classification

Navigation