A police department can only afford 1 cop on duty at any given time of day. Each

Question

A police department can only afford 1 cop on duty at any given time of day. Each cop can only 1, mile (of road). There arc a total of 10 miles that need to be policed. The cost of speeding (to society at large, i.e. the externality) is c per driver (per mile). The fine for speeding is F and the value of speeding is upsilon per driver (per mile). Finally, assume that this fine F is larger than v (otherwise the iae cannot serve as a deterrent at all). Also, note that F is not increasing in the speed - either yon speed or you don t. If you speed and get caught you are fined. The police department can choose between conducting random speed traps or announced speed traps. At random speed traps, the exact location (i.e. mile) where the cop is positioned is unknown, whereas with announced speed traps the exact location of the cop is known to all drivers. If all drivers are risk neutral, use expected utility theory to determine the conditions under which the police department will want to choose random inspections.

Explanation / Answer

as exact position of the trap will be knwn drivers will not speed up there.. hence police should use random trap...

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