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On Cheating and Whistle-Blowing Author info | Abstract | Publisher info | Download info | Related research | Statistics Aleksander Berentsen
Esther Brügger
Simon Lörtscher
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We study the role of whistle-blowing in the following inspection game. Two agents who compete for a valuable prize can either behave legally or illegally. After the competition, a controller investigates the agents' behavior. This control game has a unique equilibrium in mixed strategies. We then add a whistle-blowing stage, where the controller asks the loser to blow the whistle. This extended game has a unique perfect Bayesian equilibrium in which only a cheating loser accuses the winner of cheating and the controller tests the winner if and only if the winner is accused of cheating. Whistle-blowing reduces the frequencies of cheating, is less costly in terms of test frequencies, and leads to a strict Pareto-improvement if punishments for cheating are sufficiently large.
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Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number
dp0302.
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Date of creation: Apr 2003Date of revision:
Handle: RePEc:ube:dpvwib:dp0302Contact details of provider: Postal: Gesellschaftsstr. 49, CH-3012 Bern Phone: 0041 31 631 45 06 Fax: 41 31 631 39 92 Web page: http://www.vwi.unibe.ch/content/publikationen/index_eng.html More information through EDIRC
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Keywords: Principal-two-Agents ; Inspection Games ; Asymmetric Information ; Signalling ; Other versions of this item:
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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