The Fairness of Sanctions: Some Implications for Optimal Enforcement Policy

Abstract

In this article we incorporate notions of the fairness of sanctions into the standard model of public enforcement. When both the probability and magnitude of sanctions may be varied, the usual solution involves a very high sanction and a relatively low probability of enforcement if individuals are risk neutral. When the issue of fairness is added to the analysis, the optimal sanction generally is not extremely high because such a sanction would be seen as unfair. The optimal probability of imposing sanctions may be higher than in the usual case (to offset the lower sanction) or lower than in the usual case (because the lower sanction reduces the effectiveness of enforcement).