An Extension of the Becker Proposition to Non-Expected Utility Theory

29 Pages Posted: 28 Sep 2016

See all articles by Sanjit Dhami

Sanjit Dhami

University of Leicester

Ali al-Nowaihi

University of Leicester - Department of Economics

Date Written: September 7, 2011

Abstract

In a seminal paper, Becker (1968) showed that the most efficient way to deter crime is to impose the severest possible penalty (to maintain adequate deterrence) with the lowest possible probability (to economize on costs of enforcement). We shall call this the Becker proposition (BP). The BP is derived under the assumptions of expected utility theory (EU). However, EU is heavily rejected by the evidence. A range of non-expected utility theories have been proposed to explain the evidence. The two leading alternatives to EU are rank dependent utility (RDU) and cumulative prospect theory (CP). The main contributions of this paper are: (1) We formalize the BP in a more satisfactory manner. (2) We show that the BP holds under RDU and CP. (3) We give a formal behavioral approach to crime and punishment that could have applicability to a wide range of problems in the economics of crime.

JEL Classification: D03, D81, K42

Suggested Citation

Dhami, Sanjit and al-Nowaihi, Ali, An Extension of the Becker Proposition to Non-Expected Utility Theory (September 7, 2011). Available at SSRN: https://ssrn.com/abstract=2844480 or http://dx.doi.org/10.2139/ssrn.2844480

Sanjit Dhami (Contact Author)

University of Leicester ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

HOME PAGE: http://www2.le.ac.uk/departments/economics/people/sdhami

Ali Al-Nowaihi

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

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