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Fines versus Damages: Experimental Evidence on Care Investments

Author

Listed:
  • Florian Baumann

    (Center for Advanced Studies in Law and Economics (CASTLE), University of Bonn)

  • Tim Friehe

    (Public Economics Group, University of Marburg)

  • Pascal Langenbach

    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

This paper studies the differential effects of fines and damages on people’s investment in accident prevention. We report results from a series of experiments in which the level of monetary transfers after an accident is maintained across the two policy instruments, such that standard theory predicts the behavioral irrelevance of the instrument choice. However, we find that fines induce lower care investments than damages when fine revenue is used for prosocial ends. We discuss possible behavioral channels that may explain our findings.

Suggested Citation

  • Florian Baumann & Tim Friehe & Pascal Langenbach, 2020. "Fines versus Damages: Experimental Evidence on Care Investments," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2020_08, Max Planck Institute for Research on Collective Goods, revised Mar 2024.
    • Handle: RePEc:mpg:wpaper:2020_08
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