Differentiating between First Offenses and Repeat Offenses
Bryan C. McCannon
West Virginia University & Center for Free Enterprise
July 9, 2007
I present a model where a regulator monitors compliance with a policy by a population of individuals, some of whom repeatedly prefer to violate the policy while others occasionally want to experiment. I show that the regulator can use sanctions, contingent on past violations of the policy, to differentiate between the agents and improve welfare. As a result, a regulator prefers investing in enforcement rather than use maximal sanctions.
Number of Pages in PDF File: 30
Keywords: experimentation, overdeterrence, regulation, repeat offenses, underdeterrence
JEL Classification: K4, D6
Date posted: December 6, 2005
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