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19 download_doc-9.php - G202 (2/16/2009) Topic 4:Crime and...

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G202 (2/16/2009) Topic 4:Crime and Conflicts of Interest REQUIRED READINGS: “Enron Case” Online Enron Case Discussion: Feb. 15 th —Feb.17 th In-class Enron Case Debriefing: Feb. 18 th SKIP: “Corruption in International Business Case” Individual Criminal Incentives Gary Becker: 1992 Nobel Economist. Applied cost benefit analysis to crime. Given an individual’s utility is dependent on their income level (Y 0 ): The decision to commit a crime is dependent on the payoff of the crime (G), the probability of getting caught ( π ), and the punishment if caught (F). Criminal Decision Rule Commit a crime when: The expected utility from committing the crime is Do not commit a crime when: The expected utility from committing the crime is Example: Assume an individual with an annual income of $30,000 is considering committing a crime with a payoff of $15,000. The individual has a 1/3 chance of getting caught and if he does, he will get fined $9,000. Current Utility:
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This note was uploaded on 04/18/2011 for the course BUS 202 taught by Professor Kreft during the Winter '09 term at Indiana.

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19 download_doc-9.php - G202 (2/16/2009) Topic 4:Crime and...

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