1,721,002 research outputs found
Subgame-Perfect Punishment for Repeat Offenders
No full textFirst I show that for wealth-constrained agents who may commit an act twice the optimal sanctions are the offender's entire wealth for the first and zero for the second crime. Then I ask the question whether this decreasing sanction scheme is subgame perfect (time consistent), that is, does a rent-seeking government stick to this sanction scheme after the first crime has occurred. If the benefit and/or the harm from the crime are not too large, this is indeed the case; otherwise, equal sanctions for both crimes are optimal. (JEL D82, K47, K42) Copyright 2004, Oxford University Press.
Incentive Compatible Reimbursement Schemes for Physicians
Full text linkWe consider physicians with fixed capacity levels. If a physician's capacity exceeds demand, she may have an incentive to overtreat, i.e., she may provide unnecessary treatments to use up idle capacity. By contrast, with excess demand she may undertreat, i.e., she may not provide necessary treatments since other activities are financially more attractive. We first show that simple fee-for-service reimbursement schemes do not provide proper incentives. If insurers use, however, fee-for-service schemes with quantity restrictions, they solve the fraudulent physician problem.credence goods; expert services; incentives; medical doctors; demand inducement; insurance
Perjury versus Truth-Revelation: Quantity or Quality of Testimony
Full text linkIn trials witnesses often slant their testimony to advance their interests.To obtain truthful testimony, courts rely on perjury rules. We show that perjury rules are not truth-revealing and we derive a truth-revealing mechanism for the same set of restrictions under which perjury rules operate. If the judge uses a truth-revealing mechanism, he will get less testimony than under perjury because the defendant will not present a witness with unfavorable news; however, testimony is of higher quality. We show that a court striving for precision prefers truth-revelation to perjury. If the court is rational in the Bayesian sense, chances for the defendant to prevail are the same under perjury and truth-revelation from an ex ante point of view. Truth-revelation thus dominates perjury even when the lower quantity of testimony is taken into account.litigation process; witness; truth-revelation; mechanism design; perjury rule
Genetic Tests and Intertemporal Screening in Competitive Insurance Markets
Full text linkWe consider successive generations of non-altruistic individuals carrying a good or bad gene. Daughters are more likely to carry their mother's gene than the opposite one. Competitive insurers can perform a genetic test revealing an agent's gene. They may condition their quotes on the agent's or on her ancestors' genetic status. In equilibrium generation one is bribed to take the test with an unconditional quote. The insurer uses this information to profitably screen a finite number of generations of their offspring. The offspring of good gene carriers subsidize the tested generationgenetic tests; insurance; screening; pooling
A Note on the Optimal Punishment for Repeat Offenders
Full text linkAgents may commit a crime twice. The act is inefficient so that the agents are to be deterred. The agents are wealth constrained so that increasing the fine for the first offense means a reduction in the sanction for the second offense and vice versa. The agents may follow history dependent strategies. The government seeks to minimize the probability of apprehension. The optimal sanction scheme is decreasing rather than increasing in the number of offenses. Indeed, the sanction for the first offense equals the entire wealth while the sanction for the second offense is zero.crime and punishment; repeat offenders
An Introduction to the Legal and Economic Theories of Torts
No full textThis paper begins with a survey of the classical legal theory of torts. Then we motivate and describe the economic approach to accident law. We demonstrate that negligence rules under which one party bears the entire accident costs induce an efficient pattern of behavior in a setup with identical individuals. Finally, we show that liability rules which share damages are superior to negligence rules once we leave the identical individuals framework.
Credence Goods and Fraudelent Experts
No full textThis article is about a market for credence goods. With a credence good, consumers are never sure about the extent of the good they actually need. Therefore, sellers act as experts determining the customers' requirements. This information asymmetry between buyers and sellers obviously creates strong incentives for sellers to cheat on services. I analyze whether the market mechanism may induce nonfraudulent seller behavior. From the observation of market data such as prices, market shares, etc., consumers can infer the sellers' incentives. I show that market equilibria resulting in nonfraudulent behavior do indeed exist.
Product Differentiation and Price Competition Between a Safe and a Risky Seller
No full textA safe and risky seller serve a market. While the expensive safe seller can solve the problems of all consumers, the cheap risky seller can help a consumer only with a certain probability. The risky seller's success probabilities are distributed across consumers; by the choice of her quality the risky seller determines the shape of this distribution. If the risky seller fails, a consumer ends up with the safe seller, paying for the service twice. The risky seller chooses a quality-price pair inducing the safe seller to stick to his monopoly strategy. Some but not maximum differentiation results.
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