The Impact of Fine Size and Uncertainty on Punishment and Deterrence: Evidence from the Laboratory

Abstract

We use a laboratory experiment to test the impacts of uncertainty, the magnitude of fines and aversion against making type-I and type-II errors on legal decision making. Measuring uncertainty as the noise of a signal on the defendant's guilt observed by legal decision makers, we observe that a supposed wrongdoer is less likely to be punished if fines and uncertainty are high. Furthermore, judges care far more about type-I errors and violators steal far less often than expected payoff maximizers would. While our results support the theoretical predictions on average, a cluster analysis provides evidence for heterogenous behavior of participants, many of whom don't respond to changes in the parameters or are far more driven by uncertainty than the magnitude of fines.

Experimental criminal law: a survey of contributions from law, economics, and criminology

“…The experimenter endows one participant with an electronic entitlement that is exchanged against real money at the end of the experiment (skirting the doctrinal question whether this constitutes theft or computer fraud). Another participant has the possibility to take some or all of this endowment (Falk and Fischbacher 2002, Gravert 2013, Harbaugh, Mocan et al 2013, Pecenka and Kundhlande 2013, Feess, Schramm et al 2014, Engel and Nagin 2015, Khadjavi 2015, Fleming, Parravano et al 2016. Participants even do so if stealing reduces expected profit (Schildberg-Hörisch and Strassmair 2012, Engel and Nagin 2015).…”

“…Friesen (2012) finds a complete severity effect. Feess, Schramm et al (2014) replace certainty by the noise ratio with which another participant in the role of a judge correctly observes stealing. Decreasing this noise ratio has a much smaller effect than increasing severity.…”

Experimental Criminal Law. A Survey of Contributions from Law, Economics and Criminology

“…The experimenter endows one participant with an electronic entitlement that is exchanged against real money at the end of the experiment (skirting the doctrinal question whether this constitutes theft or computer fraud). Another participant has the possibility to take some or all of this endowment (Falk and Fischbacher 2002, Gravert 2013, Harbaugh, Mocan et al 2013, Pecenka and Kundhlande 2013, Feess, Schramm et al 2014, Engel and Nagin 2015, Khadjavi 2015, Fleming, Parravano et al 2016. Participants even do so if stealing reduces expected profit (Schildberg-Hörisch andStrassmair 2012, Engel andNagin 2015).…”

“…Friesen (2012) finds a complete severity effect. Feess, Schramm et al (2014) replace certainty by the noise ratio with which another participant in the role of a judge correctly observes stealing. Decreasing this noise ratio has a much smaller effect than increasing severity.…”

“…If fines increase, auditors (partly) offset the effect by decreasing their efforts, and hence certainty Junker 2009). High severity, and high uncertainty make authorities more hesitant to punish (Feess, Schramm et al 2014). The incidence of crime increases if the individual can bribe an official who has power to sanction her (Castro 2006).…”