Subgame-Perfect Punishment for Repeat Offenders
First I show that for wealth-constrained agents who may commit an act twice the optimal sanctions are the offender's entire wealth for the first and zero for the second crime. Then I ask the question whether this decreasing sanction scheme is subgame perfect (time consistent), that is, does a rent-seeking government stick to this sanction scheme after the first crime has occurred. If the benefit and/or the harm from the crime are not too large, this is indeed the case; otherwise, equal sanctions for both crimes are optimal. (JEL D82, K47, K42) Copyright 2004, Oxford University Press.
Volume (Year): 42 (2004)
Issue (Month): 3 (July)
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