Who commits fraud? evidence from korean gas stations

In this article, we study under what circumstances a gas station is more likely to commit fuel fraud. Using a new and hitherto unexploited list of fuel fraud detections, we find evidence that stations under less favorable economic conditions – higher operating costs and possibly more competitors – engage in fraudulent activity more often. Chain-affiliated stations commit fraud less often, suggesting an effectiveness in harnessing reputational incentives. Also, fuel fraud tends to cluster among nearby stations, consistent with propagation of illicit activity from one station to others nearby. As for pricing behavior, in general gas stations appear to keep price constant and take higher price-cost margins when selling adulterated fuel, suggesting that consumers are harmed by this kind of fraud.