Motchenkova, Evgenia (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)
Abstract
This paper concludes that, when offenders are wealth constrained and the government is resource constrained and can commit to a certain policy throughout the whole planning horizon, cost minimizing deterrence is decreasing, rather than increasing, in the number of offenses. By extending the framework, suggested in Emons (2003), to n-periods setting, we prove that for the agents who may commit an act several times, optimal sanctions are such that the fine for the first crime equals the offender's entire wealth, and the fines are zero for all the subsequent crimes. This result contradicts the widely prevailing escalating penalties imbedded in many penal codes and sentencing guidelines. In addition, analogous to Emons (2004), this scheme does not appear to be a time consistent (subgame perfect) strategy for the government in an n-periods setting. Moreover, we show that, if the government cannot commit, equal rather than decreasing sanctions will be optimal.
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Publisher Info
Paper provided by Free University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number
0008.
Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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