Fines versus Damages: Experimental Evidence on Care Investments

Florian Baumann (), Tim Friehe and Pascal Langenbach ()
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Florian Baumann: Center for Advanced Studies in Law and Economics (CASTLE), University of Bonn
Pascal Langenbach: Max Planck Institute for Research on Collective Goods, Bonn

No 2020_08, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

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.

Date: 2020-05, Revised 2024-03
New Economics Papers: this item is included in nep-exp, nep-law and nep-ore
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