Optimal Marginal Deterrence and Incentives for Precaution

Thomas Lionel ()
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Thomas Lionel: CRESE, Université de Franche Comté, IUT Besançon Vesoul, Département GEA, 30 avenue de l’Observatoire, 25030 Besançon cedex, France

Review of Law & Economics, 2015, vol. 11, issue 3, 409-433

Abstract: This paper studies marginal deterrence in the presence of a basic and an aggravated harm when the occurrence of the latter may be reduced by criminals exerting costly precaution. We determine the optimal probability of fines when the enforcement authority provides incentives such that, if criminals commit offenses, they exert precaution. We show that marginal deterrence is fully optimal, even for severe basic harms. That is, the fine associated with the basic harm is not equal to the maximal sanction, the criminal’s wealth. Moreover, implementing marginal deterrence leads to the use of fines and the probability of being caught and sanctioned in a different way compared to Becker’s well-known result.

Keywords: marginal deterrence; precaution; moral hazard; incentives (search for similar items in EconPapers)
JEL-codes: D82 K14 K42 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:rlecon:v:11:y:2015:i:3:p:409-433:n:1

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DOI: 10.1515/rle-2012-0009

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