Optimal Prevention when Informal Penalties Matter: The Case of Medical Errors

Sverre Grepperud

The B.E. Journal of Economic Analysis & Policy, 2007, vol. 7, issue 1, 30

Abstract: Individuals often respond with strong emotions to being penalised. Such responses suggest that informal penalties are important and play a role in creating deterrence. In this paper informal penalties are analysed in the context of medical errors. The introduction of informal penalties, if dependent upon formal ones, implies that: (i) the optimal enforcement regime becomes more lenient, and in some cases the lack of formal punishment is preferred, (ii) the first-best solution becomes unattainable, (iii) liability rates and formal penalty level are no longer perfect deterrence substitutes. In addition, powers of informal penalties provide a rationale for administrative sanctions (informal criticism, reprimands and warnings).

Keywords: iatrogenic injury; enforcement; administrative sanctions (search for similar items in EconPapers)
Date: 2007
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Working Paper: Optimal prevention when informal penalties matter: The case of medical errors (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejeap:v:7:y:2007:i:1:n:44

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DOI: 10.2202/1935-1682.1612

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