Which would make the probability of being caught

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Question: Suppose that your city government is interested in reducing littering. Currently, there is a $100 fine for littering and there is a 10 percent probability of being caught if you litter. The city is deciding between two different policies:

(1) It can increase the number of police that monitor littering, which would make the probability of being caught if you litter 20 percent rather than 10 percent; or

(2) It can keep the monitoring the same yet raise the fine for littering from $100 to $200. (Notice that both policies have the same expected cost of littering.) If litterers are risk averse, which policy would lead to a larger reduction in littering?

Reference no: EM131500014

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