On Cheating and Whistle-Blowing

Berentsen, Aleksander; Brügger, Esther; Lörtscher, Simon (14 April 2003). On Cheating and Whistle-Blowing (Diskussionsschriften 03-02). Bern: Universität Bern Volkswirtschaftliches Institut

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We study the role of whistle-blowing in the following inspection game. Two agents who compete for a valuable prize can either behave legally or illegally. After the competition, a controller investigates the agents’ behavior. This control game has a unique equilibrium in mixed strategies. We then add a whistle-blowing stage, where the controller asks the loser to blow the whistle. This extended game has a unique perfect Bayesian equilibrium in which only a cheating loser accuses the winner of cheating and the controller tests the winner if and only if the winner is accused of cheating. Whistle-blowing reduces the frequencies of cheating, is less costly in terms of test frequencies, and leads to a strict Pareto-improvement if punishments for cheating are sufficiently large.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Lörtscher, Simon

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Diskussionsschriften

Publisher:

Universität Bern Volkswirtschaftliches Institut

Language:

English

Submitter:

Aline Lehnherr

Date Deposited:

11 Jun 2020 16:58

Last Modified:

06 Aug 2020 14:18

JEL Classification:

C72, D82, K42

BORIS DOI:

10.7892/boris.144018

URI:

https://boris.unibe.ch/id/eprint/144018

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