The standard economic theory of crime deterrence predicts that the conviction of an innocent (type-I error) is as detrimental to deterrence as the acquittal of a guilty individual (type-II error). In this paper, we qualify this result theoretically, showing that in the presence of risk aversion, loss-aversion, or dierential sensitivity to procedural fairness, type-I errors can have a larger eect on deterrence than type-II errors. We test these predictions with an experiment where participants make a decision on whether to steal from other individuals, being subject to dierent probabilities of judicial errors. The results indicate that both types of judicial errors have a large and signicant impact on deterrence, but these eects are not symmetric. An increase in the probability of type-I errors has a larger negative impact on deterrence than an equivalent increase in the probability of type-II errors. This asymmetry is largely explained by risk aversion and, to a lesser extent, type-I error aversion.
The conventional result of the theory of the public enforcement of law is that wrongful convictions of innocents are detrimental to deterrence. This proposition has been challenged recently. In some cases, wrongful convictions do not jeopardize deterrence, because they influence equally the innocent and the guilty. Therefore deterrence does not change. We show that, in general, wrongful convictions do lower deterrence. We prove that wrongful convictions do not jeopardize deterrence only in very limited circumstances or under unlikely assumptions.
In mainstream business and economics, prizes such as the Presidential Medal of Freedom are understood as special types of incentives, with the peculiar features of being awarded in public, and of having largely symbolic value. Informed by both historical considerations and philosophical instances, our study defines fundamental theoretical differences between incentives and prizes. The conceptual factors highlighted by our analytical framework are then tested through a laboratory experiment. The experimental exercise aims to analyze how prizes and incentives impact actual individuals' behavior differently. Our results show that both incentives (monetary and contingent) and prizes (non-monetary and discretional rewards) boost motivation to perform if awarded publicly, but only prizes crowd-in motivation promoting virtuous attitude.
The standard economic theory of crime deterrence predicts that the conviction of an innocent (type-I error) is as detrimental to deterrence as the acquittal of a guilty individual (type-II error). In this paper, we qualify this result theoretically, showing that in the presence of risk aversion, loss-aversion, or di erential sensitivity to procedural fairness, type-I errors can have a larger e ect on deterrence than type-II errors. We test these predictions with an experiment where participants make a decision on whether to steal from other individuals, being subject to di erent probabilities of judicial errors. The results indicate that both types of judicial errors have a large and signi cant impact on deterrence, but these e ects are not symmetric. An increase in the probability of type-I errors has a larger negative impact on deterrence than an equivalent increase in the probability of type-II errors. This asymmetry is largely explained by risk aversion and, to a lesser extent, type-I error aversion.
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