Topic 4_Crime and COI

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

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

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

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

View Full Document
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
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

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 04/24/2011 for the course ECON 101 taught by Professor Brentkreider during the Spring '07 term at Iowa State.

### 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
Ask a homework question - tutors are online