The trap: Every dollar spent on harsher penalties buys reduced audit frequency — not reduced violations.
Rational actors observe the reduced audit probability and adjust accordingly.
Compliance p = k/b is structurally invariant to penalty x.
Panel 02
Trust Asymmetry
RANDOMIZED ENFORCEMENT
COMMITMENT DEVICES
SUBGAME-PERFECT RUNBOOKS
m* = 1/(1+x)
Optimal audit rate. As penalty severity x rises, equilibrium audit frequency falls proportionally.
p* = k/b
Compliance rate. Determined by cost k and benefit b — structurally independent of penalty severity x.
T(t) ~ log(t)
Trust accumulation. Slow logarithmic growth over months of consistent compliance.
T(fail) → 0
Trust destruction. A single verifiable failure collapses accumulated trust to near zero — instantly.