The optimal use of fines and imprisonment when wealth is unobservable |
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| Institution: | 1. Department of Medical Parasitology and Mycology, School of Public Health, Tehran University of Medical Sciences, Tehran, Iran;2. Medical Plants Research Center, Shahrekord University of Medical Sciences, Shahrekord, Iran;3. Department of Archeology, Faculty of Literature and Humanities, Tehran University, Tehran, Iran;4. Department of Archeology, Faculty of Art and Architecture, Zabol University, Zabol, Iran;5. Department of Medical Parasitology and Mycology, School of Medicine, Shiraz University of Medical Sciences, Shiraz, Iran;6. Departamento de Parasitología, Facultad de Farmacia, Universidad de Valencia, Av. Vicente Andrés Estellés s/n, 46100 Burjassot, Valencia, Spain |
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| Abstract: | This article studies the optimal use of fines and imprisonment when an offender's level of wealth cannot be observed by the enforcement authority. I employ a model in which there are two types of offenders—a low-wealth type and a high-wealth type. The consequence of the unobservability of wealth depends on whether the enforcement authority would employ fines alone, or would also impose imprisonment sentences, if wealth were observable. In the former case, the inability to observe wealth lowers social welfare. But in the latter case, the unobservability of wealth does not lower social welfare. In both cases, offering offenders a choice of sanctions can induce high-wealth offenders to pay higher fines even though their wealth is unobservable. Specifically, a relatively high imprisonment sentence must accompany the payment of a low fine, so that high-wealth offenders will prefer to pay a higher fine and bear a lower (possibly no) imprisonment sentence. |
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