Working Paper: CEPR ID: DP10249
Authors: Daniel Müller; Patrick W. Schmitz
Abstract: When penalties for first-time offenders are restricted, it is typically optimal for the lawmaker to overdeter repeat offenders. First-time offenders are then deterred not only by the (restricted) fine for a first offense, but also by the prospect of a large fine for a subsequent offense. Now suppose the restriction on penalties for first-time offenders is relaxed; i.e., larger fines for a first offense become enforceable. Should overdeterrence of repeat offenders now be reduced? We show that this is the case only if the original restriction was not very strong. Otherwise, overdeterrence of repeat offenders should actually be further amplified.
Keywords: incentives; law enforcement; limited liability; penalties; repeat offenders
JEL Codes: D82; H23; K14; K42; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| restriction on penalties for first-time offenders (K14) | overdeterrence of repeat offenders (K14) |
| relaxing the restriction on penalties for first-time offenders (K40) | penalties for repeat offenders (K42) |
| overdeterrence of repeat offenders (K14) | deterrent effect on first-time offenders (K40) |
| strong original restriction on penalties (Z28) | overdeterrence may increase (K40) |