Crime has to be punished, but does punishment reduce crime? We conduct a neutrally framed laboratory experiment to test the deterrence hypothesis, namely that crime (weakly) decreases in deterrent incentives, that is, severity and probability of punishment. In our experiment, subjects can steal from another subject. Deterrent incentives vary across and within sessions. Our across-subjects analysis rejects the deterrence hypothesis: except for high levels of incentives, subjects steal on average more the stronger the incentives. We observe two types of subjects: selfish subjects who act according to the deterrence hypothesis and fair-minded subjects for whom small incentives backfire. The Author 2010. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.
