Private Protection and Public Policing
Melbourne Institute Working Paper No. 04/19
Date: March 2019
This paper looks carefully at situations in which public and private protection are complementary, that is, when private protection must be coordinated with public protection to be effective. For example, home alarms deter theft by being connected to a local police station: if the police do not respond to a home alarm, the home alarm on its own is virtually useless in halting a crime in action. We make a distinction between gross and net complementarity and substitution, where the latter takes into account the effect on the crime rate. We show that when public and private protection are complements the optimal provision of public protection trades offs the manipulation effect of encouraging private protection with the compensatory effect of providing protection to households that do not privately invest. We discuss the implications of our results for policy and empirical research in this area.