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An extension of the Becker proposition to non-expected utility theory

  • Sanjit Dhami

    ()

  • Ali al-Nowaihi

    ()

In a seminal paper, Becker (1968) showed that the most efficient way to deter crime is to impose the severest possible penalty (to maintain adequate deterrence) with the lowest possible probability (to economize on costs of enforcement). We shall call this the Becker proposition (BP). The BP is derived under the assumptions of expected utility theory (EU). However, EU is heavily rejected by the evidence. A range of non-expected utility theories have been proposed to explain the evidence. The two leading alternatives to EU are rank dependent utility (RDU) and cumulative prospect theory (CP). The main contributions of this paper are: (1) We formalize the BP in a more satisfactory manner. (2) We show that the BP holds under RDU and CP. (3) We give a formal behavioral approach to crime and punishment that could have applicability to a wide range of problems in the economics of crime.

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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 11/41.

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Date of creation: Sep 2011
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Handle: RePEc:lec:leecon:11/41
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