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1. A right-wing, fascist industrial complex, for-profit. This type of profit-prison does NOT want to rehabilitate prisoners because it will run out of labor. This prison gets labor contracts that instead of going to high-wage workers are going to less-than-minimum-wage prisoners. Likewise, the city the prison is built in has no other economy so less prison labor means half the town could be laid off. Oh, and don't break a rule or you might get the Death Penalty. Hopefully the game eventually allows "Execution" as a punishment!
2. A liberal rehabilitation center. This type of prison does NOT want prisoners to commit more crimes, it has a succinct purpose of serving societies best interests instead of its own. This prison uses classrooms, therapy and work training to rehabilitate prisoners. Unfortunately, this is expensive and nobody likes it when our government takes better care of prisoners than the unemployed. The worst punishment this prison offers, is transferring a hopeless prisoner to the prison I described above (1.) and no prisoner wants that.
Often when 2 extremes are presented, most players will gravitate to the middle. Some people might feel better about rehabilitation while others get more pleasure out of the electric chair. Some people want to improve society, others just want to make a few bucks and go to Hawaii.
Oops, missed that one. Good news though!
Just to make a note, it's been extensively discussed (on their forums) and execution is not going to be allowed as "punishment." It'd be ridiculous anyway considering the extremes that it takes to get an execution sentence in most places anyway.
I can't wait for the rehabilitation functions though!