Optimal law enforcement with sophisticated and naïve offenders

Abstract

Research in criminology has shown that the perceived risk of apprehension often differs substantially from the true level. To account for this insight, we extend the standard economic model of law enforcement (Becker, 1968) by considering two types of offenders, sophisticates and naïves. The former are always fully informed about the enforcement effort, the latter become informed only when the effort is revealed by the authority; otherwise, naïves rely on their perceptions. We characterize the optimal enforcement effort and the decision whether to hide or reveal it. The welfare-maximizing authority chooses either a relatively high effort which is then revealed, or it chooses a relatively low effort which remains hidden. The latter policy becomes more favorable, the larger the share of naïves in the population and the higher their level of perceived effort. We then analyze three empirically important extensions, thereby allowing for lower efficacy of the enforcement effort due to avoidance activities, endogenous fines, and heterogeneity with respect to naïves' perceptions. JEL-Codes: K420, D730.

Crime and punishment in times of pandemics

“…probability of apprehension) is not unique to authorities, but applies to criminals as well. The optimal policy may then depend on the share of (un)informed criminals (see, e.g., Buechel et al., 2020 ), also keeping in mind that criminals may generally underestimate or overestimate the relevant probabilities (see Chopard & Obidzinski, 2021 ).…”

“…Similarly, the expected cost of committing a crime clearly includes the expected sanction, 10 However, things become more complex if one adopts more elaborate assumptions. As one example, the defendant might face uncertainty regarding the probability of conviction or the penalty size, for instance, because of asymmetric information (see, e.g., Buechel et al., 2020 ) or because the level of incriminating evidence observed by the judge includes some stochastic component (see, e.g., Sarel, 2018 ). This then complicates the analysis.…”

Crime and Punishment in Times of Pandemics

“…10 However, things become more complex if one adopts more elaborate assumptions. As one example, the defendant might face uncertainty regarding the probability of conviction or the penalty size, for instance, because of asymmetric information (see, e.g., Buechel et al, 2020) or because the level of incriminating evidence observed by the judge includes some stochastic component (see, e.g., Sarel, 2018). This then complicates the analysis.…”

Impact of consumer foresight on efficient overselling

“…He muttered something along the lines of, 'Well, we don't have a room anyway.' … He responded by saying that the hotel was fully committed for the night … " Consumers' inability to anticipate possible cancellations of their advance purchases can be attributed to consumer myopia or limited foresight, an important consumer behavior well studied in the economics literature (e.g., Buechel et al, 2020;Gabaix & Laibson, 2006). Specifically, due to various cognitive constraints, consumers with limited foresight fail to account for all the possibilities in the future and thus are unable to correctly anticipate the expected utility from a purchase.…”

“…Building on this, Wenzel (2014) captures how a larger number of competing firms impacts on the fraction of myopic consumers and renders shrouding add-on information less likely. Buechel et al (2020) demonstrate how the optimal law enforcement efforts should be adjusted based on the portion of naïve offenders.…”