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Optimal Prevention when Informal Penalties Matter: The Case of Medical Errors

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  • Grepperud Sverre

    ()
    (University of Oslo)

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    Abstract

    Individuals often respond with strong emotions to being penalised. Such responses suggest that informal penalties are important and play a role in creating deterrence. In this paper informal penalties are analysed in the context of medical errors. The introduction of informal penalties, if dependent upon formal ones, implies that: (i) the optimal enforcement regime becomes more lenient, and in some cases the lack of formal punishment is preferred, (ii) the first-best solution becomes unattainable, (iii) liability rates and formal penalty level are no longer perfect deterrence substitutes. In addition, powers of informal penalties provide a rationale for administrative sanctions (informal criticism, reprimands and warnings).

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    File URL: http://www.degruyter.com/view/j/bejeap.2007.7.1/bejeap.2007.7.1.1612/bejeap.2007.7.1.1612.xml?format=INT
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    Bibliographic Info

    Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

    Volume (Year): 7 (2007)
    Issue (Month): 1 (August)
    Pages: 1-30

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    Handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:44

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/bejeap

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    Cited by:
    1. Kang, HeeChung & Hong, JaeSeok & Lee, KwangSoo & Kim, Sera, 2010. "The effects of the fraud and abuse enforcement program under the National Health Insurance program in Korea," Health Policy, Elsevier, Elsevier, vol. 95(1), pages 41-49, April.

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