Divergent Behavior in Markets with Idiosyncratic Private Information

David Goldbaum

Review of Behavioral Economics, 2017, vol. 4, issue 2, 181-213

Abstract: Using a laboratory experiment we explore competing claims on the welfare effects of civil forfeiture. Experiment participants are tasked with making trade-offs in allocating resources “to fight crime†with and without the ability to seize and forfeit assets. It is an open question whether the societal impact of reducing crime is greater in a world with or without civil forfeiture. Proponents of civil forfeiture argue that the ill-gotten gains of criminals can be used by law enforcement to further fight crime. Opponents claim that the confiscation of assets by law enforcement distorts the prioritization of cases by focusing attention, not on cases with the largest societal impact, but on those with the highest valued assets that can be seized. We find that the public is better off in a world without civil forfeiture.

Keywords: Heterogeneous Agents; Efficient Markets; Learning; Dynamics; Computational Economics (search for similar items in EconPapers)
JEL-codes: C62 D82 G14 (search for similar items in EconPapers)
Date: 2017
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