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Univ. of San Diego School of Law

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Saturday, June 1, 2013

Engel on Deterrence by Imperfect Sanctions

Christoph Engel (Max Planck Institute for Research on Collective Goods) has posted Deterrence by Imperfect Sanctions – A Public Good Experiment on SSRN. Here is the abstract:

Sanctions are often so weak that a money maximizing individual would not be deterred. In this paper I show that they may nonetheless serve a forward looking purpose if sufficiently many individuals are averse against advantageous inequity. Using the Fehr/Schmidt model (QJE 1999) I define three alternative channels: (a) identical preferences are common knowledge, but inequity is not pronounced enough to sustain cooperation; (b) heterogeneous preferences are common knowledge; (c) there is preference uncertainty. In a linear public good with punishment meted out by a disinterested participant, I test two implications of the model: (a) participants increase contributions in reaction to imperfect punishment; (b) imperfect punishment helps sustain cooperation if participants experience free-riding.

http://lawprofessors.typepad.com/crimprof_blog/2013/06/engel-on-deterrence-by-imperfect-sanctions.html

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