Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149251
Authors: 
Lang, Matthias
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6164
Abstract: 
Consider legal uncertainty as uncertainty about the legality of a specific action. In particular, suppose that the threshold of legality is uncertain. I show that this legal uncertainty raises welfare. Legal uncertainty changes deterrence in opposite directions. The probability of conviction increases for firms below the threshold, while the probability of conviction decreases for firms above the threshold. Hence, legal uncertainty acts as a welfare enhancing screen and increases welfare. Legal uncertainty discourages some actions with low private benefits, while it encourages other actions with high private benefits.
Subjects: 
enforcement
deterrence
legal uncertainty
regulation
asymmetric information
incomplete contracts
JEL: 
D80
K20
K40
L50
Document Type: 
Working Paper

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