•  In similar vein, there are limits on punishment levels: one being that there is limited liability so that employee’s pecuniary reward even in the bad-outcome scenario can only be positive (d < 1) even if it is lower than the reward in case of the good outcome; further, there may be lower bounds on the bad-outcome reward as the institution may be constrained by (un-modeled) side-effects such as the costs of dealing with grievance redressal and legal recourse being undertaken by the employee in case the punishment for low-outcome scenario being realised is too severe.
Key “insights” Along the lines of Gary Becker’s seminal analysis, this simple framework for understanding vigilance leads to the following insights: 1. Detective and punitive vigilance are strategic complements: The greater the punishment, the more useful it is to detect. Conversely, having a high penalty is ineffective (given concomitant side-effects or costs) when the quality of detection is poor. 2.