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The Real Puzzle of Blackmail: An Informational Approach

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  • Thomas J. Miceli

    (University of Connecticut)

Abstract

The "puzzle" of blackmail is that threats to reveal private information that would be harmful to someone in exchange for money are illegal, but revelation is not. The resolution is that concealment of information about product quality impedes the efficient operation of markets, whereas revelation promotes it. The real puzzle is why possessors aren't naturally inclined to sell to uninformed parties, who value the information more than would-be blackmail victims. The answer has to do with the public good qualities of information, which create an appropriability problem in transactions with uninformed parties. The paper also discusses incentives to acquire compromising information.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2010-08.

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Length: 18 pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:uct:uconnp:2010-08

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Keywords: Asymmetric information; blackmail; adverse selection;

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  1. Johannes Horner & Andrzej Skrzypacz, 2009. "Selling Information," Cowles Foundation Discussion Papers 1743, Cowles Foundation for Research in Economics, Yale University, revised Aug 2010.
  2. Steven Shavell, 1994. "Acquisition and Disclosure of Information Prior to Sale," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 20-36, Spring.
  3. Cheung, Steven N S, 1982. "Property Rights in Trade Secrets," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 40-53, January.
  4. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  5. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  6. Gomez, Fernando & Ganuza, Juan-Jose, 2002. "Civil and criminal sanctions against blackmail: an economic analysis," International Review of Law and Economics, Elsevier, vol. 21(4), pages 475-498, May.
  7. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December.
  8. Helmholz, R H, 2001. "The Roman Law of Blackmail," The Journal of Legal Studies, University of Chicago Press, vol. 30(1), pages 33-52, January.
  9. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
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