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Can Punishment Generate Specific Deterrence without Updating? Analysis of a Stated Choice Scenario

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This study explores the specific deterrence generated by punishment in the context of regulatory violations with a focus on the distinction between upward revisions to future punishment parameters – likelihood and severity – and the experience of being penalized. In order to avoid the pitfalls of empirically analyzing actual choices made by regulated entities, e.g., measuring entities’ beliefs regarding the likelihood and size of future penalties, our study examines behavior associated with a stated choice scenario presented within a survey distributed to the environmental managers of facilities regulated under the U.S. Clean Water Act. This choice of respondents strengthens the external validity of our empirical results. Based on a variety of statistical methods, our empirical results strongly and robustly reject the standard hypothesis that specific deterrence stems solely from upward revisions to punishment parameters while supporting the alternative hypothesis of experiential deterrence, whereby facilities focus on recent experiences to shape their compliance behavior.

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Paper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 468.

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Date of creation: 2012
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Handle: RePEc:qld:uq2004:468

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  1. Kaplow, Louis, 1990. "Optimal Deterrence, Uninformed Individuals, and Acquiring Information about Whether Acts Are Subject to Sanctions," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 6(1), pages 93-128, Spring.
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  9. Wayne B. Gray & Jay P. Shimshack, 2011. "The Effectiveness of Environmental Monitoring and Enforcement: A Review of the Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 3-24, Winter.
  10. Scholz, John T & Gray, Wayne B, 1990. " OSHA Enforcement and Workplace Injuries: A Behavioral Approach to Risk Assessment," Journal of Risk and Uncertainty, Springer, Springer, vol. 3(3), pages 283-305, September.
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  15. Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 96-111, July.
  16. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 38(1), pages 45-76, March.
  17. Polinsky, A. Mitchell & Shavell, Steven, 1998. "On offense history and the theory of deterrence," International Review of Law and Economics, Elsevier, Elsevier, vol. 18(3), pages 305-324, September.
  18. Anton, Wilma Rose Q. & Deltas, George & Khanna, Madhu, 2002. "Incentives for Environmental Self-Regulation and Implications for Environmental Performance," Working Papers, University of Illinois at Urbana-Champaign, College of Business 02-0120, University of Illinois at Urbana-Champaign, College of Business.
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  21. Bigoni, Maria & Le Coq, Chloé & Fridolfsson, Sven-Olof & Spagnolo, Giancarlo, 2008. "Risk Aversion, Prospect Theory, and Strategic Risk in Law Enforcement: Evidence From an Antitrust Experiment," Working Paper Series in Economics and Finance, Stockholm School of Economics 696, Stockholm School of Economics.
  22. Eckert, Heather, 2004. "Inspections, warnings, and compliance: the case of petroleum storage regulation," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 232-259, March.
  23. Michael P. Haselhuhn & Devin G. Pope & Maurice E. Schweitzer & Peter Fishman, 2012. "The Impact of Personal Experience on Behavior: Evidence from Video-Rental Fines," Management Science, INFORMS, INFORMS, vol. 58(1), pages 52-61, January.
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Cited by:
  1. Vilen Lipatov, 2014. "Compliance Dynamics Generated by Social Interaction Rules," CESifo Working Paper Series 4767, CESifo Group Munich.

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