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A Theory of Whistleblower Rewards

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  • Yehonatan Givati

Abstract

To enforce the law, the government must learn about violations of the law. One way of obtaining such information is by employing police officers and investigators. An alternative way is by rewarding whistleblowers. In this paper I consider two basic questions relating to whistleblower rewards. First, what is the optimal size of whistleblower rewards? Second, how should we choose between employing police officers and rewarding whistleblowers? I develop a model that highlights two features of the whistleblowing context: whistleblowers bear a personal cost, and a reward may encourage false reports. I find that there is a nonmonotonic relationship between the personal cost to whistleblowers and the optimal reward, and between the risk of a false report and the optimal reward. Furthermore, offering a whistleblower reward dominates the employment of police officers and investigators when the risk of a false report is small.

Suggested Citation

  • Yehonatan Givati, 2016. "A Theory of Whistleblower Rewards," The Journal of Legal Studies, University of Chicago Press, vol. 45(1), pages 43-72.
    • Handle: RePEc:ucp:jlstud:doi:10.1086/684617
    DOI: 10.1086/684617
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    References listed on IDEAS

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    Cited by:

    1. Mechtenberg, Lydia & Muehlheusser, Gerd & Roider, Andreas, 2020. "Whistleblower protection: Theory and experimental evidence," European Economic Review, Elsevier, vol. 126(C).
    2. Jeffrey V. Butler & Danila Serra & Giancarlo Spagnolo, 2020. "Motivating Whistleblowers," Management Science, INFORMS, vol. 66(2), pages 605-621, February.
    3. Theo Nyreröd & Giancarlo Spagnolo, 2021. "Myths and numbers on whistleblower rewards," Regulation & Governance, John Wiley & Sons, vol. 15(1), pages 82-97, January.
    4. Salvatore Ciucci, 2025. "The effect of a lottery on collusion sustainability," Working Papers 2025.21, Fondazione Eni Enrico Mattei.
    5. Nyreröd, Theo & Spagnolo, Giancarlo, 2017. "Myths and Numbers on Whistleblower Rewards," SITE Working Paper Series 44, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 27 Apr 2018.
    6. David Lewis, 2019. "Labour market enforcement in the 21st century: should whistleblowers have a greater role?," Industrial Relations Journal, Wiley Blackwell, vol. 50(3), pages 256-276, May.
    7. Thomas Ehrmann & Aloys Prinz, 2025. "The auditing game: the dark side of the private provision of a public good," European Journal of Law and Economics, Springer, vol. 59(2), pages 329-376, April.
    8. Jef De Mot & Murat C. Mungan, 2024. "Whistle‐blowing and the incentive to hire," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1292-1308, July.
    9. Ciucci, Salvatore, 2025. "The effect of a lottery on collusion sustainability," FEEM Working Papers 373385, Fondazione Eni Enrico Mattei (FEEM).
    10. Paolo Buccirossi & Giovanni Immordino & Giancarlo Spagnolo, 2021. "Whistleblower rewards, false reports, and corporate fraud," European Journal of Law and Economics, Springer, vol. 51(3), pages 411-431, June.

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