Sanctions for repeat offenders: a question of wealth?

Abstract

In a two‐period standard law‐enforcement model, individuals observe or break the law. In addition, individuals may offend accidentally. When sanctions are limited by individual wealth constraints, the government chooses appropriate sanctions for first and repeat offenders and the level of monitoring. We assume a welfare‐oriented government and derive subgame‐perfect equilibria for constant, increasing and decreasing sanctions depending on the individual wealth level.

Gambling bank behaviour, incentive mechanism, and sanctions: A two-stage model

“…Mungan [41] allows for imperfect detection and considers an informal sanction (stigma) as well as a formal sanction. Eggert et al [20] allow the offender's wealth to differ. Miles and Pyne [37] analyse imperfect deterrence: only some criminals are deterred.…”

“…The regulatory institution detects gambling bank behaviour only after performing a 'high quality' audit and with an exogenously given probability ∈ [0, 1], 19 After the bank's gambling behaviour is detected, the regulator imposes a non-negative fine s th ∈ [0, 1] in period t as a share of the bank's profit, where subscript h = {1, 2} denotes the offence history. 20 That means that s 11 corresponds to a fine level for offences detected in the first period, s 21 implies detection of a first offence in period 2. When there was detection of an offence in the first period, s 22 denotes the sanction for a repeated offence.…”

“…The regulator identifies gambling with a detection probability after a successful audit. This is costly to her because regulatory supervision generates sunk costs c( ) per 20 This determination of the sanction amount is one of two specified in the guide of the European Central Bank [25]: Guide to the Method of Setting Administrative Pecuniary Penalties pursuant to Article 18(1) and (7) of Council Regulation (EU) No 1024/2013, at para. 2.3.…”

“…𝜃 2 > 𝜃 1 16. There are other papers where decreasing sanction schemes might be optimal under some conditions; see Burnovski and Safra[14], Mungan[39], Anderson et al[4], or Eggert et al[20].…”