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Economics of Governance

, Volume 2, Issue 3, pp 231–242 | Cite as

Optimal law enforcement when victims are rational players

  • Nuno Garoupa
Original papers

Abstract.

The economic analysis of crime usually views a victim as a passive party whose role is limited to suffering harm. In this paper, we extend the economic theory of law enforcement by modeling victims as an active party in criminal deterrence. First, they may take some precautions to avoid victimization. Second, they may or may not report their victimization.

The lack of reporting weakens law enforcement and criminal deterrence by reducing detection rates. This suggests that victims could be encouraged to report by being paid a compensation. Nevertheless, compensating victims certainly reduces precaution. We argue that such effect never offsets the gains obtained in terms of criminal detection and apprehension.

Key words: economics of crime, optimal sanction, optimal compensation 
JEL classification: K4 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2001

Authors and Affiliations

  • Nuno Garoupa
    • 1
  1. 1.Department d'Economia i Empresa, Universitat Pompeu Fabra, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain (e-mail: nuno.garoupa@econ.upf.es) ES

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