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Cheap Talk About The Detection Probability

Listed author(s):
  • 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)

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.

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File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219198913500035
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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.

Volume (Year): 15 (2013)
Issue (Month): 01 ()
Pages: 1-16

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Handle: RePEc:wsi:igtrxx:v:15:y:2013:i:01:n:s0219198913500035
DOI: 10.1142/S0219198913500035
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  1. Polinsky, A Mitchell & Shavell, Steven, 1992. "Enforcement Costs and the Optimal Magnitude and Probability of Fines," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 133-148, April.
  2. A. Mitchell Polinsky & Steven Shavell, 2009. "Public Enforcement of Law," Chapters,in: Criminal Law and Economics, chapter 1 Edward Elgar Publishing.
  3. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
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  8. Polinsky, A. Mitchell & Shavell, Steven, 1984. "The optimal use of fines and imprisonment," Journal of Public Economics, Elsevier, vol. 24(1), pages 89-99, June.
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  10. Bebchuk, Lucian Arye & Kaplow, Louis, 1992. "Optimal Sanctions When Individuals Are Imperfectly Informed about the Probability of Apprehension," The Journal of Legal Studies, University of Chicago Press, vol. 21(2), pages 365-370, June.
  11. Ivanov, Maxim, 2010. "Communication via a strategic mediator," Journal of Economic Theory, Elsevier, vol. 145(2), pages 869-884, March.
  12. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
  13. Ben-Shahar, Omri, 1997. "Playing without a rulebook: Optimal enforcement when individuals learn the penalty only by committing the crime," International Review of Law and Economics, Elsevier, vol. 17(3), pages 409-421, September.
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  15. Polinsky, A. Mitchell, 2006. "The optimal use of fines and imprisonment when wealth is unobservable," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 823-835, May.
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  18. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
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