6. DRUG DEALER DOUG Criminal mastermind Drugman Doug is going to rob a drug store. He knows that inside, there are drugs worth $1200 to the store On the street, those drugs are worth $1000. To br...

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6. DRUG DEALER DOUG Criminal mastermind Drugman Doug is going to rob a drug store. He knows that inside, there are drugs worth $1200 to the store On the street, those drugs are worth $1000. To br...

6. DRUG DEALER DOUG Criminal mastermind Drugman Doug is going to rob a drug store. He knows that inside, there are drugs worth $1200 to the store On the street, those drugs are worth $1000. To break in, Doug will destroy a door worth $200. Inside, the owner is alone, and there is no alarm, so the probability that Doug will be caught by the police is low, p 20%. a. If caught, how much should Doug pay in damages to perfectly compensate the drugstore owner? Discuss why perfect compensation may not be possible in criminal suits in general. b. How large does a fine have to be to deter Doug from committing the robbery given that he is required to return the money he got from selling the drugs if he is caught? Alternatively assume that Doug is required to perfectly compensate the drugstore owner if he is caught and then recalculate the fine needed to deter Doug. c. Discuss how Doug's incentive to commit robbery changes with less resources allocated to the police, reducing the probability of being arrested (p), and a higher fine (f) given that expected cost of commiting the crime is unchanged?

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Answer 1

Answer #1

a. Doug should pay a total of ($1200+$200) $1400 in damages to perfectly compensate the drug owner. Perfect compensation may not be possible in criminal suits as the prices of the goods lost might increase or the payment plan of the criminal might be in installments and we know the the present value of a certain amount of money is more than its future value.

b. The fine has to be $1000 in order to deter Doug from committing the robbery given that he is required to return the money he got from selling the drugs if he is caught

In the second case, if he has already sold the drugs, then his fine should $1000+$1200+$200=$2400 in order to deter him from robbing. If he hasn't sold the drugs already, then his fine should be $1400 in order to deter him from robbing.

c. As the value p decreases, his expected earning increases and therefore there is more incentive for him to commit the robbery and as the fine,f, increases, his expected earning decreases and therefore there is less incentive for him to commit the robbey

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Answer 2

6. DRUG DEALER DOUG Criminal mastermind Drugman Doug is going to rob a drug store. He knows that inside, there are drugs worth $1200 to the store On the street, those drugs are worth $1000. To br...

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