A Signalling Theory of Nonmonetary Sanctions

Posted: 7 Dec 2006

See all articles by Massimo D'Antoni

Massimo D'Antoni

University of Siena - Department of Economics

Roberto Galbiati

Department of Economics, Sciences Po-CNRS

Abstract

It is a widely accepted conclusion of the economic literature on optimal law enforcement that nonmonetary sanctions should be introduced only when fines have been used up to their maximum extent. In this paper it is shown that when the sanctioning policy conveys information about the harmfulness of the sanctioned behavior, the use of nonmonetary sanctions can be optimal even when the monetary fine is not maximal. The argument is formalized in a model with rational but uninformed individuals, who know that the enforcer has superior information about the harmfulness of actions but are uncertain about the true objectives of the enforcer.

Keywords: Optimal deterrence, nonmonetary sanctions

JEL Classification: K42

Suggested Citation

D'Antoni, Massimo and Galbiati, Roberto, A Signalling Theory of Nonmonetary Sanctions. International Review of Law and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=949669

Massimo D'Antoni (Contact Author)

University of Siena - Department of Economics ( email )

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

Roberto Galbiati

Department of Economics, Sciences Po-CNRS ( email )

28 rue des saints peres
Paris, 75007
France

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