Reward offered, no questions asked: An analysis of rewarded theft

The legal owner of a stolen good generally puts a higher value on that good than does the thief. There are therefore potential gains from trade between a legal owner and a successful thief. However, by trading with a thief, the legal owner is encouraging theft for 'ransom'. Should then negotiations between legal owners and thieves be outlawed? In this paper we suggest a framework for answering this question. We find that allowing such negotiations to take place may enhance the ex ante expected utility of owners.