A BEJEAP Contributions article.

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).

Recommended Citation

Grepperud, Sverre (2007) "Optimal Prevention when Informal Penalties Matter: The Case of Medical Errors," The B.E. Journal of Economic Analysis & Policy: Vol. 7 : Iss. 1 (Contributions), Article 44.
DOI: 10.2202/1935-1682.1612
Available at: http://www.bepress.com/bejeap/vol7/iss1/art44