We consider legal obligations against a background of social norms, e.g., societal norms, professional codes of conduct or business standards. Violations of the law trigger reputational sanctions insofar as they signal non-adherence to underlying norms, raising the issue of the design of offences. When society is only concerned with the trade-off between deterrence and enforcement costs, legal standards defining offences should align on underlying norms so long as the latter are not too deficient. When providing productive information to third parties is also a concern, legal standards should either align on underlying norms with fines that trade off deterrence against the provision of information; or legal standards should be more demanding and enforced with purely symbolic sanctions, e.g., public reprimands. Our analysis has implications for general law enforcement and regulatory policies.
We thank Robert Cooter, Jennifer Reinganum, and Kathryn Spier for very helpful comments on an earlier version and are particularly grateful to two anonymous referees and the Editor, Andrew Daughety. Claude Fluet acknowledges financial support from SSHRC Canada (grant 435-2013-1671).