Fine enough or don ’ t fine at all

This paper explores the results discussed in “A fine is a price” by Gneezy and Rustichini [2000a. A fine is a price. Journal of Legal Studies 29, 1–17] regarding the effect of fines on parents who collect their children late from day-care centers. We suggest a complementary explanation, analyzing a formal model that qualifies but does not lose the predictive power of the deterrence hypothesis. Our main policy implication can be summarized as “Fine enough or don’t fine at all.” We suggest that the Gneezy and Rustichini finding may represent a more general result and that our formal model is potentially applicable to a variety of situations. © 2005 Elsevier B.V. All rights reserved. JEL classification: A13; C93; K42