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Divergent Behavior in Markets with Idiosyncratic Private Information

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  • Goldbaum, David

Abstract

Using a laboratory experiment we explore competing claims on the welfare effects of civil forfeiture. Experiment participants are tasked with making trade-offs in allocating resources “to fight crime†with and without the ability to seize and forfeit assets. It is an open question whether the societal impact of reducing crime is greater in a world with or without civil forfeiture. Proponents of civil forfeiture argue that the ill-gotten gains of criminals can be used by law enforcement to further fight crime. Opponents claim that the confiscation of assets by law enforcement distorts the prioritization of cases by focusing attention, not on cases with the largest societal impact, but on those with the highest valued assets that can be seized. We find that the public is better off in a world without civil forfeiture.

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  • Goldbaum, David, 2017. "Divergent Behavior in Markets with Idiosyncratic Private Information," Review of Behavioral Economics, now publishers, vol. 4(2), pages 181-213, September.
    • Handle: RePEc:now:jnlrbe:105.00000064
    DOI: 10.1561/105.00000064
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    More about this item

    Keywords

    Heterogeneous Agents; Efficient Markets; Learning; Dynamics; Computational Economics;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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