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Monitoring Dealer Actions in Casinos

Suppose that in Las Vegas, casinos could monitor the actions of dealers costlessly and spot every instance in which the dealer makes a mistake in which a player is overpaid. The casino is considering disciplining its dealers by charging them the equivalent of the money lost by the casino for any mistakes that they (the dealer) might make. Other than these penalties, the dealers would be paid a straight salary per hour worked.

Does the use of this penalty make economic sense? Why?

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This penalty does not seem to be a very strict penalty. If the dealers are simply forced to pay back the extra money that the ...

Solution Summary

This solution explains if the penalty administered to dealers is fair and if so does it make economic sense.