Subgame Perfect Punishment for Repeat Offenders
University of Bern Discussion Paper No. 02.11
18 Pages Posted: 30 Oct 2002
Date Written: October 2002
First we show that for wealth-constrained agents who may commit an act twice the optimal sanctions are the offender's entire wealth for the first and zero for the second crime. Then we ask the question whether this decreasing sanction scheme is subgame perfect (time consistent), i.e., does a rent-seeking government stick to this sanction scheme after the first crime has occurred. If the benefit and/or the harm from the crime are not too large, this is indeed the case; otherwise, equal sanctions for both crimes are optimal.
Keywords: crime and punishment, repeat offenders, subgame perfection
JEL Classification: D82, K41, K42
Suggested Citation: Suggested Citation