Cheap Talk About the Detection Probability

22 Pages Posted: 14 Jan 2012

See all articles by Florian Baumann

Florian Baumann

University of Tuebingen - Faculty of Economics and Business Administration

Tim Friehe

Independent

Date Written: January 13, 2012

Abstract

This paper analyzes whether the behavior of potential offenders can be guided by information on the actual detection probability transmitted by the policy maker. It is established that, when viewed as a cheap-talk game, the existence of equilibria with information transmission depends on the level of the sanction, the level of costs related to imposing the sanction, and the level of social harm resulting from the offense. In addition, we find that the policy maker (i.e., society as a whole) is not necessarily better off ex ante when more information is transmitted in equilibrium, but that potential offenders always are.

Keywords: crime, cheap talk, law enforcement, imperfect information

JEL Classification: K42, H23, C72

Suggested Citation

Baumann, Florian and Friehe, Tim, Cheap Talk About the Detection Probability (January 13, 2012). Available at SSRN: https://ssrn.com/abstract=1984633 or http://dx.doi.org/10.2139/ssrn.1984633

Florian Baumann

University of Tuebingen - Faculty of Economics and Business Administration ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

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