The Dennett-Nash Gap in Corporate Enforcement: Why Corporations Recidivate More Than Individuals

Corporate enforcement worldwide rests on a hidden assumption that may be false: that corporations respond to penalties the way humans do. This paper identifies a systematic error in applying classical game theory to corporate defendants, a conceptual gap with profound implications for regulatory design. The problem is not merely empirical. Corporations recidivate at 2.7-3.9× the rate of individuals across multiple enforcement regimes (EPA, SEC, state securities). But the deeper issue is theoretical: game theory assumes players operate at the same intentionality level. When this assumption fails—when Level 1 optimizers face Level 3 enforcers—Nash equilibrium cannot exist and standard deterrence models break down. The paper formalizes this "Dennett-Nash Gap" and derives testable predictions. Enforcement strategies designed for moral agents (shame, reputation, voluntary compliance) systematically fail against optimization engines. The analysis suggests why massive penalties fail to deter corporate recidivism and identifies alternative regulatory architectures.