Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333505 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
Center for Mathematical Economics Working Papers No. 752
Publisher: 
Bielefeld University, Center for Mathematical Economics (IMW), Bielefeld
Abstract: 
We study "willful ignorance" - choosing not to learn whether a task is illegal - in a lawmaker-principal-agent game and characterize the penalty policies that implement welfare-maximizing behavior. The model delivers an implementability frontier : which equilibrium behaviors can exist and be selected by penalties. With perfect inquiry, this frontier is aligned with the welfare ordering, so the lawmaker can make the welfare-maximizing behavior both exist and be preferred by all parties. With imperfect inquiry, noise breaks that alignment and produces two failures: inquiry that is socially desirable may be infeasible at any penalty, and inquiry that is socially undesirable may persist because it cannot be switched off. We compare harm-based, compliance-based, and dual-penalty rules: harm-based rules preserve control but tightens feasibility; compliance-based rules relax feasibility but sacrifices control; dual penalty rules recover both levers subject to simple bounds. The framework yields practical guidance for calibrating penalties to harm, inquiry accuracy, and inquiry costs. It also implies that ignorance cannot serve as a shield: the absence of knowing crime in equilibrium is driven by incentives rather than morality, making non-inquiry the true strategic margin of liability design.
Subjects: 
willful ignorance
ostrich instruction
law and economics
asymmetric information
JEL: 
K14
K42
D82
D86
H23
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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