Organized crime or individual crime? Endogenous size of a criminal organization and the optimal law enforcement

Abstract

This article develops a simple but general criminal decision framework in which individual crime and organized crime are coexisting alternatives to a potential offender. It enables us to endogenize the size of a criminal organization and explore interactive relationships among sizes of criminal organization, the crime rate, and the government's law enforcement strategies. We show that the method adopted to allocate the criminal organization's payoffs and the extra benefit provided by the criminal organization play crucial roles in an individual's decision to commit a crime and the way in which he or she commits that crime. The two factors also jointly determine the market structure for crime and the optimal law enforcement strategy to be adopted by a government. (JEL K4). ? Western Economic Association International.