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

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Author Info
Sverre Grepperud (University of Oslo)
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.bepress.com/cgi/viewcontent.cgi?article=1612&context=bejeap
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Publisher Info
Article provided by Berkeley Electronic Press in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 7 (2007)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:44

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Related research
Keywords: iatrogenic injury; enforcement; administrative sanctions;

Find related papers by JEL classification:
D64 - Microeconomics - - Welfare Economics - - - Altruism
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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