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Journal of Law, Economics, and Organization Advance Access published online on January 3, 2008
Journal of Law, Economics, and Organization, doi:10.1093/jleo/ewm049
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© The Author 2008. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

An Economic Model of Whistle-Blower Policy

Anthony Heyes*

University of London

Sandeep Kapur**

University of London

* Royal Holloway College, University of London. Email: a.heyes{at}rhul.ac.uk.

** Birkbeck College, University of London. Email: s.kapur{at}bbk.ac.uk.

"Whistle-blowing" is an increasingly common element of regulatory enforcement programs and one that is encouraged by recent legislation in the United States and elsewhere. We examine how responsive regulators should be to whistle-blower tip-offs and how severe should penalties be for wrongdoers detected in this way. Competing psychological theories as to what motivates employees to become whistle-blowers are operationalized as alternative behavioral heuristics. Optimal policy depends upon the motives attributed to whistle-blowers—which of the theories you subscribe to—but is not in general characterized by maximal penalties nor routine pursuit of complaints, even when pursuit is costless.


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