Escalating penalties for repeat offenders
Agents may commit a crime twice. The act is inefficient so that the agents are to be deterred. Even if an agent is law abiding, she may still commit the act accidentally. The agents are wealth constrained. The government seeks to minimize the probability of apprehension. If the benefit from the crime is small, the optimal sanction scheme is decreasing in the number of offenses. By contrast, if the benefit is large, sanctions are increasing in the number of offenses. Increasing sanctions do not make the criminal track less attractive; they make being honest more attractive.
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