Escalating Penalties and Imperfect Information
"Escalating Penalties and Imperfect Information",
German Working Papers in Law and Economics:
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We show that imperfect information of potential oenders concerning the magnitude of enforcement variables can reason escalating penalties welfare maximizing in two dfferent variants of the optimal-deterrence model. Imperfect information causes distortions in indi- viduals' perception of the enforcement variables that apply to the expected sanction of the first offense. Once detected, individuals learn about enforcement variables which makes this argument less relevant for the expected sanction for consecutive offenses.