Crime Reporting: Profiling and Neighbourhood Observation

We consider the effect of giving incentives to ordinary citizens to report potential criminal activity. Additionally we look at the effect of "profiling" certain groups. In the first model, we focus on two kinds of profiling. If profiling means that police single out the profiled group for more investigation, then crime in the profiled group decreases. If profiling manifests itself through biased reporting by citizens, crime in the profiled group actually increases. In the second model, we consider a neighbourhood structure where individuals get information on possible criminal activity by neighbours on one side and decide whether to report or not based on the signal. When costs of reporting are low relative to the cost of being investigated, costs of investigation are increasing in the number of reports and there is at least one biased individual, we show there is "contagion equilibrium" where everyone reports his or her neighbour.