Jail or Fine - Let Them Choose
We reconsider two standard results of deterrence theory. The first states that there is no need for jail terms until monetary fines are not exhausted. The second says that there is no marginal deterrence without joint production in law enforcement. In a framework with asymmetric information about offenders' wealth however, neither result holds if one takes into account a commonly used instrument of law enforcement, namely to offer the convicted criminal the choice of either going to jail or paying a fine. The basic idea of our paper is that the fine can be adjusted such that only one of two types prefers it over the jail term. Thus, fine-jail-options serve as a screening device because they allow to deter both types independently although their wealth is private information.
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