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Optimal Punishment Schemes with State-Dependent Preferences

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  • Neilson, William S

Abstract

The optimal trade-off between the certainty and severity of punishment is studied in a setting in which individuals are more sensitive to changes in certainty than severity and have state-dependent preferences--being convicted of a crime reduces utility at every wealth level. In this setting, it is not optimal to set the probability of punishment at one even if it is costless in convict criminals because reducing the certainty of punishment also reduces the probability that offenders' utility functions shift downward. The optimal level of certainty is therefore lower than that implied by prior studies based on state-independent preferences. Copyright 1998 by Oxford University Press.

Suggested Citation

  • Neilson, William S, 1998. "Optimal Punishment Schemes with State-Dependent Preferences," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 266-271, April.
  • Handle: RePEc:oup:ecinqu:v:36:y:1998:i:2:p:266-71
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    Cited by:

    1. Liqun Liu & Andrew Rettenmaier & Thomas Saving, 2009. "Conditional payments and self-protection," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 159-172, April.
    2. Eric Langlais, 2008. "Detection Avoidance and Deterrence: Some Paradoxical Arithmetic," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(3), pages 371-382, June.
    3. Nuno Garoupa, 1998. "Crime and punishment: Further results," Economics Working Papers 344, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Liqun Liu, 2008. "Spillover of cause-specific longevity interventions: an independent mortality risk model," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 9(2), pages 193-201, May.
    5. Eric LANGLAIS, 2009. "Deterrence Of A Criminal Team: How To Rely On Its Members' Short Comings ?," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(1(7)_ Spr).
    6. Nuno Garoupa, 2003. "Behavioral Economic Analysis of Crime: A Critical Review," European Journal of Law and Economics, Springer, vol. 15(1), pages 5-15, January.
    7. Langlais, Eric, 2006. "Criminals and risk attitude," MPRA Paper 1149, University Library of Munich, Germany, revised 15 Sep 2006.
    8. Chiu, W.Henry & Madden, Paul, 2007. "Crime, punishment, and background risks," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 543-555, April.
    9. Éric Langlais, 2010. "Les criminels aiment-ils le risque ?," Revue économique, Presses de Sciences-Po, vol. 61(2), pages 263-280.
    10. Liu, Liqun & Neilson, William S., 2006. "Endogenous private safety investment and the willingness to pay for mortality risk reductions," European Economic Review, Elsevier, vol. 50(8), pages 2063-2074, November.

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