Optimal Penalties for Repeat Offenders – The Role of Offence History

Abstract

AbstractWithin an infinite and a corresponding finite game framework we analyse intertemporal punishment for repeat offenders. The legal authority is assumed to maximize social welfare by minimizing the sum of harm from crimes and cost of punishment. We show that the time horizon considerably affects the structure of the optimal penalty scheme. In the finite game framework decreasing as well as escalating penalty schemes may be optimal. For the more appropriate infinite game framework we show three main results: First, any penalty scheme can be replaced by a (weakly) escalating penalty scheme that leads to the same criminal activity and the same social penalization cost. Second, the optimal penalty scheme is of the escalating type. Third, the socially optimal level of crime under escalating penalties may be higher than the level which would be optimal under uniform penalties.