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August 13, 2004

Bait Cars in Vancouver; Auditing Games

A mall in Vancouver has many signs like the one I show here. Isn't it a good idea? Best of all would be to actually plant some bait cars too, but that isn't even necessary, if budgets are tight. Criminals will rightly be skeptical that the bait cars exist, but there is not much to be done about that unless some kind of certification or reputation becomes possible. Newspaper reports of successful baiting *might* work.

This is the same situation as in the following two of my articles:

``Lobbying When the Decisionmaker Can Acquire Independent Information,'' Public Choice (1993) 77: 899-913. Politicians trade off the cost of acquiring and processing information against the benefit of being re- elected. Lobbyists may possess private information upon which politicians would like to rely without the effort of verification. If the politician does not try to verify, however, the lobbyist has no incentive to be truthful. This is modelled as a game in which the lobbyist lobbies to show his conviction that the electorate is on his side. In equilibrium, sometimes the politician investigates, and sometimes the information is false. The lobbyists and the electorate benefit from the possibility of lobbying when the politician would otherwise vote in ignorance, but not when he would otherwise acquire his own information. The politician benefits in either case. Lobbying is most socially useful when the politician's investigation costs are high, when he is more certain of the electorate 's views, and when the issue is less important. In Ascii-Latex (43K) or pdf (204K, http://Pacioli.bus.indiana.edu/erasmuse/published/Rasmusen_93PUBCHO.lobbying.pdf ).

"Explaining Incomplete Contracts as the Result of Contract- Reading Costs," in the BE Press journal, Advances in Economic Analysis and Policy. Vol. 1: No. 1, Article 2 (2001). http://www.bepress.com/bejeap/advances/vol1/iss1/art2. Much real-world contracting involves adding finding new clauses to add to a basic agreement, clauses which may or may not increase the welfare of both parties. The parties must decide which complications to propose, how closely to examine the other side's proposals, and whether to accept them. This suggests a reason why contracts are incomplete in the sense of lacking Pareto-improving clauses: contract-reading costs matter as much as contract- writing costs. Fine print that is cheap to write can be expensive to read carefully enough to understand the value to the reader, and especially to verify the absence of clauses artfully written to benefit the writer at the reader's expense. As a result, complicated clauses may be rejected outright even if they really do benefit both parties, and this will deter proposing such clauses in the first place. In ascii-latex and pdf (http: //Pacioli.bus.indiana.edu/erasmuse/published/Rasmusen_01.negot.pdf).

It reminds me of the old joke about the farmer who, having noticed that watermelons were disappearing from his garden, posted a sign saying,

"One of the watermelons in this garden is poisoned."

The next day at dawn he looked out and saw that no more watermelons had been taken but the "One" on the sign had been crossed out. Now the sign said,
TWO of the watermelons in this garden is poisoned."
Note, however, that the last part of the joke does not carry over to parking lots in Vancouver.

Posted by erasmuse at August 13, 2004 02:02 PM

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