Reversible Rewards

Abstract

This article offers a new mechanism of private enforcement, combining sanctions and rewards into a scheme of “reversible rewards.” The enforcing party sets up a precommitted fund and offers it as reward to another party to refrain from violation. If the violator turns down the reward, the enforcer can use the money in the fund for one purpose only—to pay for punishment of the violator. The article shows that this scheme doubles the effect of funds invested in enforcement and allows the enforcer to stop violations that would otherwise be too costly to deter. It argues that reversible rewards could be used to bolster the enforcement of rights in selective areas of private and international law and could also be applied strategically in litigation in contexts where compliance incentives are otherwise weak.