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The Optimal Use of Fines and Imprisonment

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  • A. Mitchell Polinsky
  • Steven Shavell

Abstract

This paper examines the use of fines and imprisonment to deter individuals from engaging in harmful activities. These sanctions are analyzed separately as well as together, first for identical risk-neutral individuals and then for two groups of risk-neutral individuals who differ by wealth. When fines are used alone and individuals are identical, the optimal fine and probability of apprehension are such that there is some "underdeterrence." If individuals differ by wealth, then the optimal fine for the high wealth group exceeds the fine for the low wealth group. When imprisonment is used alone and individuals are identical, the optimal imprisonment term and probability may be such that there is either underdeterrence or overdeterrence. If individuals differ by wealth, the optimal imprisonment term for the high wealth group may be longer or shorter than the term for the low wealth group. When fines and imprisonment are used together, it is desirable to use the fine to its maximum feasible extent before possibly supplementing it with an imprisonment term. The effects of risk aversion on these results are also discussed.

Suggested Citation

  • A. Mitchell Polinsky & Steven Shavell, 1982. "The Optimal Use of Fines and Imprisonment," NBER Working Papers 0932, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0932 Note: LE
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    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    2. A. Mitchell Polinsky, 1979. "Private versus Public Enforcement of Fines," NBER Working Papers 0338, National Bureau of Economic Research, Inc.
    3. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-891, December.
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