Sanctions for repeat offenders: a question of wealth?
| Author | Wolfgang Eggert,Steffen Minter,Maximilian Stephan,Handirk Ungern‐Sternberg |
| Published date | 01 November 2017 |
| Date | 01 November 2017 |
| DOI | http://doi.org/10.1111/sjpe.12126 |
SANCTIONS FOR REPEAT OFFENDERS:
A QUESTION OF WEALTH?
Wolfgang Eggert*, Steffen Minter**, Maximilian Stephan** and
Handirk von Ungern-Sternberg**
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.
II
NTRODUCTION
Repeat offenders frequently receive more severe sanctions than first-time
offenders.
1
The literature on (optimal) law enforcement identifies four major
reasons for increasing sanctions (1) erroneous conviction, (2) stigma, (3) learn-
ing effects, and (4) accidental offenses. Each of these reasons has produced its
own sub-literature on law enforcement (see Miceli, 2013, for a comprehensive
survey). The first one mainly focuses on the (optimal) design of law enforce-
ment in environments where erroneous conviction causes social costs because
of a resulting loss of confidence in the enforcement machinery (Stigler, 1970)
and the consequences for courts to assemble additional confidence over time
(Chu et al., 2000; Posner, 2014). The second strand of research analyzes the
possibility that recidivism becomes relatively more attractive for convicted
offenders due to an adverse income effect. As a result, expected sanctions have
to rise to maintain deterrence (Funk, 2004; Miceli and Bucci, 2005). The third
aforementioned line of work has in common that offenders gain information
about the enforcement system, i.e., how to avoid apprehension. In order to
deter professional wrongdoers law enforcement must respond with increasing
sanctions (Sah, 1991; Ben-Shahar, 1997; At and Chappe, 2008; Friehe, 2009;
Mungan, 2010). As a result the size of learning effects determines whether a
*University of Freiburg and CESifo
**University of Freiburg
1
See, e.g. 2011 Federal Sentencing Guidelines Manual, Ch. 4, Criminal History and Crim-
inal Livelihood: “A defendant with a record of prior criminal behavior is more culpable than
a first offender and thus deserving of greater punishment.”
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12126, Vol. 64, No. 5, November 2017
©2017 Scottish Economic Society.
467
government chooses increasing or decreasing sanctions for repeat offenders
(Dana, 2001).
2
The fourth sub-literature considers unintentional or accidental
offenses in the sense that society cannot observe if the act is committed on
purpose. The implication is that recorded multiple offenses receive hard pun-
ishment (Rubinstein, 1979). Some papers introduce the concept of individual
weakness which may lead to lapses, i.e. time-inconsistent decisions. Mungan
(2014) found that escalating penalties are socially desirable because they con-
tribute to deter individuals with a clean record minimizing the cost of punish-
ment for those who lapsed and committed the act. Emons (2007) used a two-
period setting in which individuals choose the offense at the beginning of the
first period. The sanction scheme crucially depends on initial wealth and the
benefit from offense. Decreasing sanctions are implemented by the government
in cases where the benefit from offense is relatively large.
3
Against the litera-
ture in favor of escalating penalty schemes, Anderson et al. (2015) claim that
multi-period models generally find that the optimal penalty structure is either
flat or declining. A prominent study by Burnovski and Safra (1994) argues
that decreasing sanctions might be efficient in a n-period setting if the number
of offenses is chosen ex ante. Dana (2001) developed a rationale for decreasing
sanctions in an environment where the probability of detection increases and
inexperienced offenders overcome an optimism bias over time. The framework
suggested in Emons (2003) is extended by Motchenkova (2014) where declin-
ing sanctions are derived based on the assumption that repeat offenders are
caught with lower probabilities than first timers. Endres and Rundshagen
(2016) examined that the time horizon is important for the penalty schedule.
In the finite game framework they find decreasing as well as escalating penal-
ties to be optimal.
4
The above-mentioned literature suggests that it is a relevant question to ask
under which conditions the (optimal) sanction scheme is increasing, constant
or decreasing in the number of offenses. We use a consolidated model which
combines the most relevant features of the above-mentioned literature. The
present paper combines accidental offenses with history-dependent (subgame-
perfect) strategies. In line with Emons (2004), the government maximizes wel-
fare defined as fines minus the harm caused by offenses minus enforcement
costs.
5
Revenue of fines serves as compensation for the damage of an offense.
It is at the heart of the present analysis that the each offense causes social
harm sufficiently large to make prosecution always a rational choice for
2
Miles and Pyne (2015) presented a different learning process where individuals update
their priors on whether they are low- or high-ability criminals. While the first type is deterred
with lower penalties, the latter needs escalating penalties to refrain from offending.
3
Emons (2003) used a similar two-period model without accidental offenses to show that
the sanction for first-time offenders should be entirely confiscatory with no sanction after-
wards.
4
In an earlier paper, Endres and Rundshagen (2012) show that in an infinite period game
the optimal penalty structure comprises escalating penalties.
5
Polinsky and Shavell (2000) introduced a fairness-related term in their welfare function.
This is similar to our approach if the fairness-related utility is equivalent to the fine.
468 WOLFGANG EGGERT ET AL.
Scottish Journal of Political Economy
©2017 Scottish Economic Society
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