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Whistleblowing: A Theory with Application to Environmental Regulation

Professor Anthony Heyes
Royal Holloway College
Email: A.Heyes@rhul.ac.uk| 

Date: 26 October 2004
Time
: 1:00pm - 2:30pm
Venue
: CARR Seminar Room, H615

Abstract

"Whistleblowing" is a common feature of our regulatory landscape, yet there is no formal economic model of it. We propose such a model and use it to explore how regulatory institutions should be designed to accommodate it. Sociological and psychological research in the area points to three alternative theories as to why individuals might disclose, even when such action is not in their (apparent) self-interest. Individuals who disclose may be conscience cleansers, altruistic, or punishment-motivated. The policy problem is to decide how frequently to pursue disclosures made by whistleblowers, how much protection to offer to whistleblowers, and how substantially to fine firms whose plans for wrong-doing are detected in this way. Not surprisingly, optimal policy depends upon the motives attributed to whistleblowers, but is not in general characterised by maximal penalties nor routine pursuit of complaints, even when pursuit is costless.

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