Precautionary Incentives for Privately Informed Victims
24 Pages Posted: 16 Oct 2002
Date Written: May 21, 2002
When one victim's precautions against crime have spillover benefits to other victims, individuals do not take the socially optimal amount of precaution. I explore the use of criminal sanctions as a mechanism to correct this: Criminals are punished based on the level of precaution taken by the victim. The problem is compounded when victims have private information about their costs of precaution. I find that, when a sanctioning scheme is used to induce different levels of precaution from high-cost and low-cost victims, a sanction less than the maximum may be used to punish crimes against either type of victim. I also consider the extent to which such a mechanism is consistent with current legal doctrine.
JEL Classification: K14, K42
Suggested Citation: Suggested Citation