Deterrence and Information: The Optimal Use of Monetary and Nonmonetary Sanctions Revisited

19 Pages Posted: 20 Apr 2005

See all articles by Massimo D'Antoni

Massimo D'Antoni

University of Siena - Department of Economics

Roberto Galbiati

Department of Economics, Sciences Po-CNRS

Date Written: January 2005

Abstract

It is a widely accepted conclusion of the economic literature on deterrence that nonmonetary sanctions should be introduced only when monetary fines have been used up to their maximum extent. However, this conclusion is at odds with what is commonly observed e.g. in the case of deterrence of driving offenses, where nonmonetary sanctions such as licence suspension or vehicle withdrawal are extensively used, even though it would be possible to apply a monetary sanction of equivalent value.

In this paper it is shown that when the sanctioning policy conveys information about the riskiness of the sanctioned behavior, the conclusion about the optimal use of nonmonetary sanctions may be different. Namely, the use of nonmonetary sanctions can be optimal even though the monetary fine is not maximal. The argument is formalized in a model with rational though uninformed individuals, who know that the enforcer has superior information about the riskiness of action but are uncertain about the true objectives of the enforcer.

Keywords: Optimal deterrence, nonmonetary sanctions, driving offenses

JEL Classification: K42

Suggested Citation

D'Antoni, Massimo and Galbiati, Roberto, Deterrence and Information: The Optimal Use of Monetary and Nonmonetary Sanctions Revisited (January 2005). Available at SSRN: https://ssrn.com/abstract=701424 or http://dx.doi.org/10.2139/ssrn.701424

Massimo D'Antoni

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy

Roberto Galbiati (Contact Author)

Department of Economics, Sciences Po-CNRS ( email )

28 rue des saints peres
Paris, 75007
France

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