An important result in the economic theory of enforcement is that, under
certain circumstances, it is optimal for a fine to be as high as possible - to
equal the entire wealth of individuals. Such a fine allows the probability
of detection to be as low as possible, thereby saving enforcement costs. This
note shows that when the level of wealth varies among individuals, the optimal
fine generally is less than the wealth of the highest wealth individuals, and
may well be less than the wealth of most individuals.
*Published:
The American Economic Review, Vol. 81, No. 3, pp. 618-621, (June 1991).
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