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Exam law economics 130224
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Department of Economics Course name: Law and Economics Course code: EC 2105 Type of exam: REGULAR Examiner: Lars Vahtrik Number of credits: 7,5 credits Date of exam: Sunday 24 February 2013 Examination time: 3 hours [14:00-17:00] Write your identification number on each paper and cover sheet (the number stated in the upper right hand corner on your exam cover). Use one cover sheet per question. Explain notions/concepts and symbols. If you think that a question is vaguely formulated, specify the conditions used for solving it. Only legible exams will be marked. Question 4 is a credit question. If you have handed in assignments during the course you may choose to answer this question anyway if you aim at a higher score. Note that in this case the score on the exam will be counted regardless of your score on the assignments! No aids are allowed.
The exam consists of 4 questions. Each question is worth 25 points, 100 points in total. For the grade E 45 points are required, for D 50 points, C 60 points, B 75 points and A 90 points.
Your results will be made available on your “My Studies” account ( www.mitt.su.se) on Thursday March 14 at the latest.
Good luck!
Question 1 a) Explain why very harsh punishment combined with a low detection probability may not be an efficient deterrent for young first time offenders. Suggest a more appropriate deterrence policy for this category of offenders. (9p) b) Empirical studies seem to suggest that, controlling for other variables, there is a negative correlation between the level of penalty and crime rates. Explain why we still cannot conclude that this observation can be solely attributed to the deterrence effect of higher penalty levels. Kessler & Levitt (1990) claims to have solved the problem of isolating the deterrence effect. In their study they observe a noticeable decline in crime rates comparing the time period immediately before and immediately after immediately after a criminal reform in California involving sentence enhancements for certain eligible crimes. The reform meant that the defendant would receive a five-year increment to his or her incarceration for each prior conviction of a serious felony. Explain the logic behind their claim. Even though the study establishes a significant deterrence effect for the affected group (repeat offenders) from harsher punishment, we cannot conclude that the same is necessarily true for first time offenders. Is there any reason to expect that first time offenders will respond differently to harsher punishment than repeat offenders (apart from the reasons given in your response to question 1a). (8p) c) Try to explain why a successful attempt to reduce the supply of drugs, by increasing the expected punishment for suppliers, may not be an efficient policy in the short run if your aim is to reduce drug related crimes like violent crimes, robbery and property crimes. Include the response from suppliers, drug addicts and non-addicts to the new policy in your analysis. Is there any reason to believe that the policy could be more effective in the log run? (8p) Question 2 Consider Hart and More’s example with the chef, the skipper and the tycoon. Explain the setup in the example and discuss the consequences of different allocations of ownership of the yacht for the incentives to make relation specific investments that increase the value of the cruise. (25 p)