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A Note on Optimal Fines When Wealth Varies Among Individuals

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Author Info
A. Mitchell Polinsky
Steven Shavell

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Abstract

An important result in the economic theory of enforcement is that, under certain circumstances, it is optimal for a fine to be as high as possible - to equal the entire wealth of individuals. Such a fine allows the probability of detection to be as low as possible, thereby saving enforcement costs. This note shows that when the level of wealth varies among individuals, the optimal fine generally is less than the wealth of the highest wealth individuals, and may well be less than the wealth of most individuals.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3232.

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Date of creation: Nov 1991
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Publication status: published as The American Economic Review, Vol. 81, No. 3, pp. 618-621, (June 1991).
Handle: RePEc:nbr:nberwo:3232

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Polinsky, A. Mitchell & Shavell, Steven, 1984. "The optimal use of fines and imprisonment," Journal of Public Economics, Elsevier, vol. 24(1), pages 89-99, June. [Downloadable!] (restricted)
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  2. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169. [Downloadable!] (restricted)
  3. Louis Kaplow, 1992. "The Optimal Probability and Magnitude of Fines for Acts that Definitely are Undesirable," NBER Working Papers 3008, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hugh Gravelle & Nuno Garoupa, . "Optimal Deterrence with Legal Defence Expenditure," Discussion Papers 00/08, Department of Economics, University of York. [Downloadable!]
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  2. Timothy Stanley, 1995. "Optimal Penalties for Concealment of Crime," Law and Economics 9507001, EconWPA, revised 27 Dec 1995. [Downloadable!]
  3. Jeong-Yoo Kim, 2007. "Optimal Law Enforcement when the Offender can Dispose of his Wealth," Review of Law & Economics, Berkeley Electronic Press, vol. 3(2), pages 3. [Downloadable!] (restricted)
  4. Nuno Garoupa, 1997. "The Economics of Organized Crime and Optimal Law Enforcement," Economics Working Papers 246, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1997. [Downloadable!]
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  5. Avner Bar-Ilan & Bruce Sacerdote, 2001. "The Response to Fines and Probability of Detection in a Series of Experiments," NBER Working Papers 8638, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Marette, Stéphan, 2005. "Inspection Intensity and Market Structure," Staff General Research Papers 12451, Iowa State University, Department of Economics. [Downloadable!]
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  7. Langlais, Eric, 2007. "Too much or not enough crimes? On the ambiguous effects of repression," MPRA Paper 1575, University Library of Munich, Germany. [Downloadable!]
  8. Boyd, James, 1996. "Banking on "Green Money:" Are Environmental Financial Responsibility Rules Fulfilling Their Promise?," Discussion Papers dp-96-26, Resources For the Future. [Downloadable!]
  9. Anna Rita Germani, 2007. "The Environmental Enforcement in the Civil and the Common Law Systems. A Case on the Economic Effects of Legal Institutions," Quaderni DSEMS 22-2007, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia. [Downloadable!]
  10. Timothy Stanley, 1995. "Radar Detectors, Fixed and Variable Costs of Crime," Law and Economics 9507002, EconWPA, revised 27 Dec 1995. [Downloadable!]
  11. A. Mitchell Polinsky, 2004. "Optimal Fines and Auditing When Wealth is Costly to Observe," NBER Working Papers 10760, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Bogetic, Zeljko & Hillman, Arye L., 1994. "The tax base in transition : the case of Bulgaria," Policy Research Working Paper Series 1267, The World Bank. [Downloadable!]
  13. A. Mitchell Polinsky, 2004. "The Optimal Use of Fines and Imprisonment When Wealth is Unobservable," NBER Working Papers 10761, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Arguedas, Carmen, 2005. "Optimal environmental standards under asymmetric information and imperfect enforcement," Discussion Paper 10, Tilburg University, Center for Economic Research. [Downloadable!]
  15. Arguedas, Carmen, 2007. "To Comply or Not To Comply? Pollution Standard Setting Under Costly Monitoring and Sanctioning," Working Papers in Economic Theory 2007/13, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
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  16. Nuno Garoupa, 2000. "Optimal Magnitude and Probability of Fines," Economics Working Papers 454, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
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