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Steven Shavell, The Optimal Use of Nonmonetary Sanctions as a Deterrent, 77 Am. Econ. Rev. 584 (1987).

Abstract: A theoretical model of deterrence is studied in which the imposition of nonmonetary (as opposed to monetary) sanctions is socially costly. It is therefore desirable that the system of sanctions be designed so that sanctions are imposed infrequently. If courts possess perfect information, the optimal system is such that sanctions are never imposed--all who can be deterred will be--but, realistically, courts' information will be imperfect and sanctions will be imposed.