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Cheap Talk About The Detection Probability

Author

Listed:
  • FLORIAN BAUMANN

    (DICE, University of Düsseldorf, Universitätsstr. 1, 40225 Düsseldorf, Germany)

  • TIM FRIEHE

    (University of Bonn, Center for Advanced Studies in Law and Economics, 53113 Bonn, Germany;
    CESifo, Munich, Germany)

Abstract

This paper analyzes whether the behavior of potential offenders can be guided by information on the actual detection probability transmitted by the policy maker. It is established that, when viewed as a cheap-talk game, the existence of equilibria with information transmission depends on the level of the sanction, the level of costs related to imposing the sanction, and the level of social harm resulting from the offense. In addition, we find that the policy maker (i. e., society as a whole) is not necessarily better off ex ante when more information is transmitted in equilibrium, but that potential offenders always are.

Suggested Citation

  • Florian Baumann & Tim Friehe, 2013. "Cheap Talk About The Detection Probability," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 1-16.
    • Handle: RePEc:wsi:igtrxx:v:15:y:2013:i:01:n:s0219198913500035
    DOI: 10.1142/S0219198913500035
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    References listed on IDEAS

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    Cited by:

    1. Zenou, Yves & Sommer, Marc, 2019. "Imperfect Information, Social Norms, and Beliefs in Networks," CEPR Discussion Papers 14087, C.E.P.R. Discussion Papers.
    2. Buechel, Berno & Feess, Eberhard & Muehlheusser, Gerd, 2020. "Optimal law enforcement with sophisticated and naïve offenders," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 836-857.

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    More about this item

    Keywords

    Crime; cheap talk; law enforcement; imperfect information; K42; H23; C72;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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