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The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes

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The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes Berkeley Law From the SelectedWorks of Robert Cooter November 2000 The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes Contact Author Start Your Own SelectedWorks Notify Me of New Work Available at: http://works.bepress.com/robert_cooter/71 Berkeley Olin Program in Law & Economics, Working Paper Series (University of California, Berkeley) Year  Paper  The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes Robert Cooter ∗ Nuno Garoupa † ∗University of California at Berkeley †Universitat Pompeu Fabra, and Harvard Law School This paper is posted at the eScholarship Repository, University of California. http://repositories.cdlib.org/blewp/32 Copyright c©2000 by the authors. The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes Abstract Some crimes involve the cooperation of two or more criminals for mutual gain. Instead of deterring these crimes, the state can prevent them by creat- ing distrust among criminals. The state should offer amnesty and a bounty to the criminal who first secures punishment of the other participant in a co- operative crime. We especially focus on bribes, which occur when someone pays an agent to violate a duty owed to the principal. To prevent bribes, the principal offers amnesty and a bounty to the debtor or agent who secures the other party’s punishment. Under certain conditions, the game’s equilibrium changes from cooperation to non-cooperation (prisoner’s dilemma), so bribes disappear. 1 The Virtuous Circle of Distrust: A Mechanism to Deter Bribes And Other Cooperative Crimes By Robert Cooter and Nuno Garoupa (first draft: 5 Nov 99) (current draft: 7 Nov 00) Abstract: Some crimes involve the cooperation of two or more criminals for mutual gain. Instead of deterring these

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