1. Dr. Simon Hakim, Director Center for Competitive Government
The Fox School of Business & Management
Temple University

2. POP CONFERENCE OCTOBER 28, 2004
Evaluating Alternative Policies
To Combat False Emergency Calls
Presented by: Simon Hakim
with
Erwin A. Blackstone
Andrew J. Buck

3. The Balance of Costs & Benefits
The cost variables are:
To owners
Installation outlays $420,035
Monthly charges $453,773
To the Police Department $139,081
Response to false activations
Total Cost: $1,012,889

4. B. The Benefit Variables Are:
1 Avoidance of burglaries
1.1 Cost of violent crimes
(assault and rape)
$77,624
1.2 Cost of Property stolen
Cost to Homeowner.
$69,012
Incomplete burglary
$60,264
Demoralization cost
$426,091

5. Benefit Variables (cont)
2 Avoidance of fires
Cost to Homeowners
Cost to Insurers
Demoralization Cost:
Insurance Discount
Total Benefits:
Net Benefits
$22,939,748
$334,075
Included in 1.2.3
$90,900
$1,080,905
$68,016

6. Benefits of Alarms To Alarm Owner- Burglary To the Community
Deterrence by yard sign
At break-in alarm sound prevents penetration
Once inside the premises-shorter stay
Similar benefits from preventing spread of fire
To the Community
Police save time for securing alarmed property
Displacement/Umbrella effects?

7. Problems With The Current System
Efficiency
Higher cost to police
Lack of choice to consumers
Alarm activators become criminals
Prices do not reflect actual cost
Price discrimination:
business
residential
schools
religious and chartable facilities
municipal facilities

8. Problems (continued) Equity
Cross subsidization between false activators and non-alarm owners/non–activating owners.

9. Significance of false alarm problem
Estimated annual national cost is $1.8 billion; 36 million false alarm activations; 10-20% of patrol officer time spent on responding to false alarms.
If we solve the problem it will add the equivalent of 30,000 officers nationwide.

10. Can we increase net benefits to the community?
Efficiency
Reduce number of false activations.
Reduce cost of response.
Equity
Cross subsidization between false activators
and non alarm owners/non-activators.

11. Is response to Alarms a public good?
A valid alarm is a public good.
Reduce pool of burglars
Deterrence for other burglars
Apprehension-punishment
A false alarm is a private good.
Customer is identified and response is a private service
No others in the community benefit
Benefits foregone–displacing other worthwhile police activities.

12. Alternative 1: Do Nothing
Police deliver private service, causing cross subsidization.
Pricing of response is not based on cost.
Police treat alarm response at low priority, thus reducing the effectiveness of alarm.
Causes congestion on emergency communication systems.
Response to other events takes longer.
Registration of systems is bureaucratic, costly and unnecessary.
Violators are treated as criminals rather than customers.

13. Alternative 2 Managed Competition
Police maintain response
Allow private companies to respond
Price at cost. No escalating fees, no free response. Charge all targets at cost
Commercial
Residential
Public and religious

14. Alternative 2: (Continued)
The business of response. Revenues of false alarms should be credited to the police account.
Registration fees should be eliminated. Fees collected for no service rendered yields unjustified tax on alarm owners.
Comments
The solution is likely to occur in rural/small suburban localities where the market is too small for private firms.

15. Alternative 2 (Continued)
Benefits
Police act as a business where it is not a public good.
Introduction of competition improves efficiency, enhances consumer welfare, and stimulates introduction of technology.

16. Alternative 3 Verified Response
Police respond only after physical verification
Police respond only to real events.
State licensing or private certification of guards and companies . (license guard companies, certify UL)
Registration of alarms is unnecessary

17. Benefits:
Competition among responders results in choice of price/quality packages.
Faster response by private companies and police
Patrol cars respond faster to other emergencies.
Less congestion on 911 or on other emergency communication system.
Consumers have greater incentives to adopt video/audio technology to save on response.
Police perform public duties for which they are responsible and trained.
Treat alarm activators as customers rather than criminals.

18. Criteria for Success Private Response
Feasible if in high density area and/or high value establishments/area.
Feasible if bundled with other services: Patrol, vacation services, stationary guard, locking/un-locking buildings.
Police do not offer free response or price response below its own cost.
Police cooperate by raising priority for verified cases.

19. Private Response Evidence
Private response time ranges from 5 to 30 minutes, almost all under 20 minutes. Average police response-40 minutes (our survey; SLC)
The cost of response is less than half that of police. Average cost of police is $50-$60 (our work).
Reduce congestion on 911 and improve police response to other emergencies.
No evidence of misconduct or consumer complaints with respect to private response companies.

20. Conclusions Alarms are beneficial to the community.
Under the current system it is inefficient and inequitable for police to respond to false alarms.
If, however, police wish to retain some of the false response they must allow others to enter and compete, and they must price at or above their cost.
Verified response comes closest to the economic model of competition. It solves the public vs. private good aspect of alarm response.