Topic 4_Crime and COI

Topic 4_Crime and COI - Topic 4: Crime and Conflicts of...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Topic 4: Crime and Conflicts of Interest REQUIRED READINGS: “Enron Case” Online Enron Case Discussion: 2/13—2/15 In-class Enron Case Debriefing: 2/16
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Gary Becker (1992 Nobel Economist): Criminal Decision Rule Assume an individual with an annual income of $30,000 (Yo) is considering committing a crime with a payoff of $15,000 (G). The individual has a 1/3 chance of getting caught (π) and if he does, he will get fined $9,000 (F). Current Utility: U = Expected Utility: EU = EU = Commit crime if expected utility from committing the crime is greater than the current utility. Don’t commit crime if expected utility from committing the crime is less than the current utility. ) )( ( ) )( 1 ( 0 0 0 F Y G Y Utility Expected Y Utility Current - + + - = = π
Background image of page 2
Variables of Interest The size of the punishment (F). Strategic Variable for government The probability of being caught (π). Government can affect this with detection technology
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 11

Topic 4_Crime and COI - Topic 4: Crime and Conflicts of...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online