INCOME-PROPORTIONAL FINES AND TRAFFIC ENFORCEMENT EQUITY: A GAME-THEORETIC ANALYSIS WITH EVIDENCE FROM MACEDONIA’S PROJECT SAFE CITY

Abstract

This paper extends game-theoretic models of traffic law enforcement to incorporate income heterogeneity in both violation benefits and compliance costs, demonstrating that standard flat-fine systems systematically fail to deter high-income drivers. We formalize the well-established empirical finding from transportation economics that the value of time—and therefore the benefit of violating speed limits—scales with income. Under a flat fine f, the violation condition bi +ci > pf is more easily satisfied by drivers with higher incomes, producing a monotonically increasing relationship between income and violation propensity. This income-gradient in non-compliance represents both an efficiency failure (high-income violators remain undeterred) and an equity failure (enforcement effectively targets the poor while exempting the wealthy). We show that income-proportional day-fine systems—under which the fine is a multiple of the offender’s daily earnings—eliminate this income gradient by making the deterrence condition income-invariant. The analysis shows that the current flat-fine structure leaves the top income decile and above substantially under deterred, while the day-fine systems are equitable redistributions of penalty burden and social welfare improvements that simultaneously increase deterrence efficiency and reduce distributional harm.