Abstract
AbstractMany studies find that public law enforcers have self‐interested reasons to maximize financial recoveries. We analyze a principal‐agent model where a social‐welfare‐maximizing government needs to motivate self‐interested law enforcers to exert enforcement effort to detect offending firms, assuming that a firm's harmful act brings a private gain to himself and a harm to the society. We find that the competitive system with effort duplication dominates that without duplication when the social harm caused by an act is sufficiently large. Our paper thus provides a rationale for the existence of multiple‐enforcer systems with effort duplications in the real world when enforcers are (fully or partially) self‐interested.
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