29 J. Legal Stud. 1 (2000)
A Fine Is a Price

handle is hein.journals/legstud29 and id is 13 raw text is: A FINE IS A PRICE
URI GNEEZY and ALDO RUSTICHINI*
ABSTRACT
The deterrence hypothesis predicts that the introduction of a penalty that leaves
everything else unchanged will reduce the occurrence of the behavior subject to the
fine. We present the result of a field study in a group of day-care centers that contra-
dicts this prediction. Parents used to arrive late to collect their children, forcing a
teacher to stay after closing time. We introduced a monetary fine for late-coming
parents. As a result, the number of late-coming parents increased significantly.
After the fine was removed no reduction occurred. We argue that penalties are usu-
ally introduced into an incomplete contract, social or private. They may change the
information that agents have, and therefore the effect on behavior may be opposite of
that expected. If this is true, the deterrence hypothesis loses its predictive strength,
since the clause everything else is left unchanged might be hard to satisfy.
I. INTRODUCTION
SUPPOSE you are the manager of a day-care center for young children. The
center is scheduled to operate every day until four in the afternoon, when the
parents are supposed to come and collect their children. Quite frequently, how-
ever, parents arrive late, and force you to stay after working hours. You have
considered a few alternatives in order to reduce the frequency of this behavior.
A natural option is to introduce a fine: every time a parent comes late, she will
have to pay a fine. Will that reduce the number of parents who come late?
The prediction that it will seems extremely plausible. It is in fact also
commonly made in two distinct fields of research: legal and criminal stud-
ies, on the one hand, and psychological studies, on the other.
The literature in psychology on this topic is very large, and it is textbook
material.' After early formulations of the theory,2 a host of studies followed,
but the conclusion is still controversial.
* Technion-Israel Institute of Technology, Haifa, Israel, and CentER for Economic Re-
search, Tilburg University, The Netherlands, respectively. We thank David Easley, Patrick
Francois, Edward Glaeser, David Levine, Ellen Nyhus, Tom Palfrey, Eric Posner, Luca Ri-
gotti, Jos6 Scheinkman, Peyton Young, Paul Webley, numerous seminar audiences, and an
anonymous referee for very useful conversations and comments on the interpretation of the
results in our study.
For a clear exposition on this topic, see A. Bandura, Principles of Behavior Modification
(1969); and B. Schwartz, Psychology of Learning and Behavior (1984).
2 A first test of the effect of punishment was given by W. K. Estes, An Experimental Study
of Punishment, 3 Psychol. Monographs 263 (1944).
[Journal of Legal Studies, vol. XXIX (January 2000)]
 2000 by The University of Chicago. All rights reserved. 0047-2530/2000/2901-0001$01.50

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