Type
Article
Title
A Signaling Theory of Nonmonetary Sanctions
Author(s)
D'ANTONI Massimo - Dipartimento di Economia Politica, University of Siena, Italy (Author)
GALBIATI Roberto - European University Institute (EUI) (Author)
Editor
US : Elsevier
Volume
27
Pages
204 - 218 p.
ISSN
01448188
DOI
10.1016/j.irle.2007.06.008
Keywords
Optimal deterrence, Nonmonetary sanctions
Abstract
EN
It is a widely accepted conclusion of the economic literature on optimal law enforcement that nonmonetary sanctions should be introduced only when fines have been used up to their maximum extent. In this paper it is shown that when the sanctioning policy conveys information about the harmfulness of the sanctioned behavior, the use of nonmonetary sanctions can be optimal even when the monetary fine is not maximal. The argument is formalized in a model with rational but uninformed individuals, who know that the enforcer has better information about the harmfulness of actions but are uncertain about the true objectives of the enforcer.
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