Low-probability-high-penalty enforcement strategies and the efficient operation of the plea-bargaining system

Abstract

Economists have long believed that the optimal enforcement of any given expected penalty involves setting the penalty as high as possible so as to allow for a correspondingly low probability of punishment that economizes on enforcement costs. Limits on how high the penalty can be have been thought to be constrained by sufficiently low enforcement costs and the criminals’ wealth and level of risk aversion.’ Easterbrook also notes that a low-probability-high-penalty strategy imposes particularly high penalties on some risk-averse people who are concerned about being falsely convicted.2 However, even these discussions understate the