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Infringers’ willingness to pay compensation versus fines

Author

Listed:
  • Pieter T. M. Desmet

    (Erasmus University Rotterdam)

  • Franziska Weber

    (Erasmus University Rotterdam)

Abstract

In many areas such as consumer law or competition law, legislators can opt between two alternative forms of sanctions to remedy wrongdoing: they can impose an infringer to pay either a fine or a compensation. There is a major research gap regarding the infringers’ reactions to the different forms of sanctions. This paper reports an experiment that investigated infringers’ willingness to pay compensation versus fines. Results show that regardless of victim characteristics (whether the victim is a company or an NGO), infringers are willing to pay higher amounts in compensation than in fines, view compensation as more fair and believe compensation is better able to restore their reputation. Compensation and fines did not differ in the extent to which they stimulated infringers’ willingness to take precautionary measures. Participants who inflicted harm to a company rather than an NGO, surprisingly viewed their sanction as more fair, irrespective of the type of sanction in place. Our findings highlight some important strengths of compensation from a infringer’s point of view that are to be weighed in the policy debate.

Suggested Citation

  • Pieter T. M. Desmet & Franziska Weber, 2022. "Infringers’ willingness to pay compensation versus fines," European Journal of Law and Economics, Springer, vol. 53(1), pages 63-80, February.
    • Handle: RePEc:kap:ejlwec:v:53:y:2022:i:1:d:10.1007_s10657-021-09709-2
    DOI: 10.1007/s10657-021-09709-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Compensation; Fine; Willingness to pay; Fairness; Reputation; Deterrence;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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