When and How the Punishment Must Fit the Crime

24 Pages Posted: 18 Feb 2015

See all articles by George J. Mailath

George J. Mailath

University of Pennsylvania - Department of Economics; Research School of Economics, ANU

Volker Nocke

University of Mannheim

Lucy White

Centre for Economic Policy Research (CEPR); Boston University - Department of Finance & Economics

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Date Written: February 15, 2015

Abstract

In repeated normal-form (simultaneous-move) games, simple penal codes (Abreu, 1986, 1988) permit an elegant characterization of the set of subgame-perfect outcomes. We show that the logic of simple penal codes fails in repeated extensive-form games. By means of examples, we identify two types of settings in which a subgame-perfect outcome may be supported only by a profile with the property that the continuation play after a deviation is tailored not only to the identity of the deviator, but also to the nature of the deviation.

Keywords: Simple Penal Code, Subgame Perfect Equilibrium, Repeated Extensive Game, Optimal Punishment.

JEL Classification: C70, C72, C73

Suggested Citation

Mailath, George J. and Nocke, Volker and White, Lucy, When and How the Punishment Must Fit the Crime (February 15, 2015). PIER Working Paper No. 15-008, Available at SSRN: https://ssrn.com/abstract=2565868 or http://dx.doi.org/10.2139/ssrn.2565868

George J. Mailath (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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HOME PAGE: http://web.sas.upenn.edu/gmailath/

Research School of Economics, ANU ( email )

HW Arndt Building
College of Business and Economics
Canberra, ACT 2601
Australia

Volker Nocke

University of Mannheim ( email )

Lucy White

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Boston University - Department of Finance & Economics ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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