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An extension of the Becker proposition to non-expected utility theory

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  • Dhami, Sanjit
  • al-Nowaihi, Ali

Abstract

In a seminal paper, Becker (1968) showed that the most efficient way to deter crime is to impose the severest possible penalty (to maintain adequate deterrence) with the lowest possible probability (to economize on costs of enforcement). We shall call this the Becker proposition (BP). The BP is derived under the assumptions of expected utility theory (EU). However, EU is heavily rejected by the evidence. A range of non-expected utility theories have been proposed to explain the evidence. The two leading alternatives to EU are rank dependent utility (RDU) and cumulative prospect theory (CP). The main contributions of this paper are: (1) we formalize the BP in a more satisfactory manner; (2) we show that the BP holds under RDU and CP; and (3) we give a formal behavioral approach to crime and punishment that could have applicability to a wide range of problems in the economics of crime.

Suggested Citation

  • Dhami, Sanjit & al-Nowaihi, Ali, 2013. "An extension of the Becker proposition to non-expected utility theory," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 10-20.
    • Handle: RePEc:eee:matsoc:v:65:y:2013:i:1:p:10-20
    DOI: 10.1016/j.mathsocsci.2012.06.005
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    3. Feess, Eberhard & Sarel, Roee, 2022. "Optimal fine reductions for self-reporting: The impact of loss aversion," International Review of Law and Economics, Elsevier, vol. 70(C).
    4. Chopard, Bertrand & Obidzinski, Marie, 2021. "Public law enforcement under ambiguity," International Review of Law and Economics, Elsevier, vol. 66(C).
    5. Subhasish M. Chowdhury & Frederick Wandschneider, 2013. "Anti-trust and the ‘Beckerian Proposition’: the Effects of Investigation and Fines on Cartels," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-09, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    6. Matteo Rizzolli, 2016. "Adjudication: Type-I and Type-II Errors," CERBE Working Papers wpC15, CERBE Center for Relationship Banking and Economics.

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    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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