To Give In or Not To Give In To Bribery? Setting the Optimal Fines for Violations of Rules when the Enforcers are Likely to Ask for Bribes1

In this paper, we develop a model of law enforcement with the possibility of corruption between the enforcer and the potential offender. We study how the violation rate changes with the level of the fine imposed on violations. We show that there is always equilibrium violation regardless of the fine level. Moreover, we find, in contrast to the conventional wisdom, that the fine level that minimizes violations can be intermediate rather than large