Bond, Philip; Hagerty, Kathleen - In: American Economic Journal: Microeconomics 2 (2010) 3, pp. 138-59
We study the design of enforcement mechanisms when enforcement resources are chosen ex ante and are inelastic ex post. Multiple equilibria arise naturally. We identify a new answer to the old question of why non-maximal penalties are used to punish moderate actions: "marginal" penalties are much...