IDEAS home Printed from https://ideas.repec.org/a/eee/jobhdp/v166y2021icp137-148.html
   My bibliography  Save this article

Horseshoes, hand grenades, and regulatory enforcement: Close experience with potential sanctions and fraud deterrence

Author

Listed:
  • Douthit, Jeremy
  • Millar, Melanie
  • White, Roger M.

Abstract

We investigate the deterrence effect of experience with regulatory enforcement on fraud in a unique natural setting. Using ride-level data on New York City taxicab drivers, we identify drivers who fraudulently overcharge customers and pair them with the outcomes of drivers’ experience with regulatory enforcement (taxi court). We examine whether drivers’ experience with the taxi court, specifically whether the taxi court found them guilty or not guilty of fraud, affects their subsequent fraud. Interestingly, we find that the effect of experience with the regulatory enforcement on the likelihood of future fraud depends on the verdict received. Consistent with an impact bias in drivers’ affective forecasting, drivers who are found guilty (not guilty) are more (less) likely to commit fraud than similar drivers without recent taxi court experience. Our results have implications for academics and policymakers by showing that sometimes the threat of enforcement can be more effective at deterring future fraud than the actual enforcement itself.

Suggested Citation

  • Douthit, Jeremy & Millar, Melanie & White, Roger M., 2021. "Horseshoes, hand grenades, and regulatory enforcement: Close experience with potential sanctions and fraud deterrence," Organizational Behavior and Human Decision Processes, Elsevier, vol. 166(C), pages 137-148.
    • Handle: RePEc:eee:jobhdp:v:166:y:2021:i:c:p:137-148
    DOI: 10.1016/j.obhdp.2019.09.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0749597818304801
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.obhdp.2019.09.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1015-1049.
    2. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
    3. Cheng, C. S. Agnes & Huang, Henry He & Li, Yinghua, 2016. "Does Shareholder Litigation Deter Insider Trading?," Journal of Law, Finance, and Accounting, now publishers, vol. 1(2), pages 275-318, December.
    4. Smith,Vernon L., 2009. "Rationality in Economics," Cambridge Books, Cambridge University Press, number 9780521133388, September.
    5. Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
    6. Molenmaker, Welmer E. & de Kwaadsteniet, Erik W. & van Dijk, Eric, 2014. "On the willingness to costly reward cooperation and punish non-cooperation: The moderating role of type of social dilemma," Organizational Behavior and Human Decision Processes, Elsevier, vol. 125(2), pages 175-183.
    7. Murnighan, J. Keith & Wang, Long, 2016. "The social world as an experimental game," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 80-94.
    8. Loukas Balafoutas & Adrian Beck & Rudolf Kerschbamer & Matthias Sutter, 2013. "What Drives Taxi Drivers? A Field Experiment on Fraud in a Market for Credence Goods," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(3), pages 876-891.
    9. Francesca Gino & Lamar Pierce, 2010. "Robin Hood Under the Hood: Wealth-Based Discrimination in Illicit Customer Help," Organization Science, INFORMS, vol. 21(6), pages 1176-1194, December.
    10. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    11. Iacus, Stefano & King, Gary & Porro, Giuseppe, 2009. "cem: Software for Coarsened Exact Matching," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 30(i09).
    12. John, Leslie K. & Loewenstein, George & Rick, Scott I., 2014. "Cheating more for less: Upward social comparisons motivate the poorly compensated to cheat," Organizational Behavior and Human Decision Processes, Elsevier, vol. 123(2), pages 101-109.
    13. Mateus Joffily & David Masclet & Charles N Noussair & Marie Claire Villeval, 2014. "Emotions, Sanctions, and Cooperation," Southern Economic Journal, John Wiley & Sons, vol. 80(4), pages 1002-1027, April.
    14. repec:pri:cepsud:125krueger is not listed on IDEAS
    15. Gabriel J. Michael, 2015. "Who's Afraid of WikiLeaks? Missed Opportunities in Political Science Research," Review of Policy Research, Policy Studies Organization, vol. 32(2), pages 175-199, March.
    16. Catherine H. Tinsley & Robin L. Dillon & Matthew A. Cronin, 2012. "How Near-Miss Events Amplify or Attenuate Risky Decision Making," Management Science, INFORMS, vol. 58(9), pages 1596-1613, September.
    17. Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur A. Stone, 2006. "Would You Be Happier If You Were Richer? A Focusing Illusion," Working Papers 77, Princeton University, Department of Economics, Center for Economic Policy Studies..
    18. Majid Ghorbani & Yuan Liao & Sinan Çayköylü & Masud Chand, 2013. "Guilt, Shame, and Reparative Behavior: The Effect of Psychological Proximity," Journal of Business Ethics, Springer, vol. 114(2), pages 311-323, May.
    19. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
    20. Henry Schneider, 2010. "Moral Hazard in Leasing Contracts: Evidence from the New York City Taxi Industry," Journal of Law and Economics, University of Chicago Press, vol. 53(4), pages 783-805.
    21. Noval, Laura J., 2016. "On the misguided pursuit of happiness and ethical decision making: The roles of focalism and the impact bias in unethical and selfish behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 133(C), pages 1-16.
    22. Rajgopal, Shivaram & White, Roger, 2019. "Cheating when in the hole: The case of New York city taxis," Accounting, Organizations and Society, Elsevier, vol. 79(C).
    23. Matthew Blackwell & Stefano Iacus & Gary King & Giuseppe Porro, 2009. "cem: Coarsened exact matching in Stata," Stata Journal, StataCorp LP, vol. 9(4), pages 524-546, December.
    24. Dimmock, Stephen G. & Gerken, William C., 2012. "Predicting fraud by investment managers," Journal of Financial Economics, Elsevier, vol. 105(1), pages 153-173.
    25. Sharma, Eesha & Mazar, Nina & Alter, Adam L. & Ariely, Dan, 2014. "Financial deprivation selectively shifts moral standards and compromises moral decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 123(2), pages 90-100.
    26. Houser, Daniel & Vetter, Stefan & Winter, Joachim, 2012. "Fairness and cheating," European Economic Review, Elsevier, vol. 56(8), pages 1645-1655.
    27. George, Jennifer M. & Dane, Erik, 2016. "Affect, emotion, and decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 136(C), pages 47-55.
    28. King, Gary & Zeng, Langche, 2001. "Logistic Regression in Rare Events Data," Political Analysis, Cambridge University Press, vol. 9(2), pages 137-163, January.
    29. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
    30. Klein, April, 2002. "Audit committee, board of director characteristics, and earnings management," Journal of Accounting and Economics, Elsevier, vol. 33(3), pages 375-400, August.
    31. Glenn W. Harrison, 2013. "Field experiments and methodological intolerance," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(2), pages 103-117, June.
    32. Yam, Kai Chi & Chen, Xiao-Ping & Reynolds, Scott J., 2014. "Ego depletion and its paradoxical effects on ethical decision making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 124(2), pages 204-214.
    33. C. Kirabo Jackson & Henry S. Schneider, 2011. "Do Social Connections Reduce Moral Hazard? Evidence from the New York City Taxi Industry," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 244-267, July.
    34. Gino, Francesca & Schweitzer, Maurice E. & Mead, Nicole L. & Ariely, Dan, 2011. "Unable to resist temptation: How self-control depletion promotes unethical behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 115(2), pages 191-203, July.
    35. Yip, Jeremy A. & Schweitzer, Maurice E., 2016. "Mad and misleading: Incidental anger promotes deception," Organizational Behavior and Human Decision Processes, Elsevier, vol. 137(C), pages 207-217.
    36. repec:wly:soecon:v:80:4:y:2014:p:1002-1027 is not listed on IDEAS
    37. repec:cup:judgdm:v:1:y:2006:i::p:1-12 is not listed on IDEAS
    38. Gino, Francesca & Margolis, Joshua D., 2011. "Bringing ethics into focus: How regulatory focus and risk preferences influence (Un)ethical behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 115(2), pages 145-156, July.
    39. Brian W. Mayhew & Pamela R. Murphy, 2014. "The Impact of Authority on Reporting Behavior, Rationalization and Affect," Contemporary Accounting Research, John Wiley & Sons, vol. 31(2), pages 420-443, June.
    40. Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur A. Stone, 2006. "Would You Be Happier If You Were Richer? A Focusing Illusion," Working Papers 77, Princeton University, Department of Economics, Center for Economic Policy Studies..
    41. Tomz, Michael & King, Gary & Zeng, Langche, 2003. "ReLogit: Rare Events Logistic Regression," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 8(i02).
    42. Ethan Cohen-Cole, 2011. "Credit Card Redlining," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 700-713, May.
    43. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    44. repec:hal:spmain:info:hdl:2441/4km7l02j139aj8hl7kcccmqk9s is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shohfi, Thomas D. & White, Roger M., 2022. "Does native country turmoil predict immigrant workers’ honesty in markets?," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 150-164.
    2. Kenchington, David G. & Shohfi, Thomas D. & Smith, Jared D. & White, Roger M., 2022. "Do sin tax hikes spur cheating in interpersonal exchange?," Accounting, Organizations and Society, Elsevier, vol. 96(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kenchington, David G. & Shohfi, Thomas D. & Smith, Jared D. & White, Roger M., 2022. "Do sin tax hikes spur cheating in interpersonal exchange?," Accounting, Organizations and Society, Elsevier, vol. 96(C).
    2. Rajgopal, Shivaram & White, Roger, 2019. "Cheating when in the hole: The case of New York city taxis," Accounting, Organizations and Society, Elsevier, vol. 79(C).
    3. Shohfi, Thomas D. & White, Roger M., 2022. "Does native country turmoil predict immigrant workers’ honesty in markets?," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 150-164.
    4. Melanie Millar & Roger M. White & Xin Zheng, 2023. "Substance Abuse and Workplace Fraud: Evidence from Physicians," Journal of Business Ethics, Springer, vol. 183(2), pages 585-602, March.
    5. Loukas Balafoutas & Rudolf Kerschbamer & Matthias Sutter, 2017. "Second‐Degree Moral Hazard In A Real‐World Credence Goods Market," Economic Journal, Royal Economic Society, vol. 127(599), pages 1-18, February.
    6. Noval, Laura J., 2016. "On the misguided pursuit of happiness and ethical decision making: The roles of focalism and the impact bias in unethical and selfish behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 133(C), pages 1-16.
    7. Kanze, Dana & Conley, Mark A. & Higgins, E. Tory, 2021. "The motivation of mission statements: How regulatory mode influences workplace discrimination," Organizational Behavior and Human Decision Processes, Elsevier, vol. 166(C), pages 84-103.
    8. Silvia Angerer & Daniela Glätzle‐Rützler & Christian Waibel, 2021. "Monitoring institutions in healthcare markets: Experimental evidence," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 951-971, May.
    9. Dezső, Linda & Loewenstein, George, 2019. "Self-serving invocations of shared and asymmetric history in negotiations," European Economic Review, Elsevier, vol. 120(C).
    10. Lalin Anik & Lara B Aknin & Michael I Norton & Elizabeth W Dunn & Jordi Quoidbach, 2013. "Prosocial Bonuses Increase Employee Satisfaction and Team Performance," PLOS ONE, Public Library of Science, vol. 8(9), pages 1-8, September.
    11. Matthias Bürker & G. Alfredo Minerva, 2014. "Civic capital and the size distribution of plants: short-run dynamics and long-run equilibrium," Journal of Economic Geography, Oxford University Press, vol. 14(4), pages 797-847.
    12. Huma Javaid & Xavier Castaner & Panos Desyllas & Orietta Marsili, 2023. "To acquire or not to acquire? Duration of due diligence in technology acquisitions," MIOIR Working Paper Series 2023-02, The Manchester Institute of Innovation Research (MIoIR), The University of Manchester.
    13. Katharina Pistor, "undated". "Addressing Deterrence and Regulatory Failure in Emerging Stock Markets," American Law & Economics Association Annual Meetings 1092, American Law & Economics Association.
    14. Nives Della Valle & Matteo Ploner, 2017. "Reacting to Unfairness: Group Identity and Dishonest Behavior," Games, MDPI, vol. 8(3), pages 1-19, July.
    15. Guignet, Dennis B. & Martinez-Cruz, Adan L., 2018. "The impacts of underground petroleum releases on a homeowner's decision to sell: A difference-in-differences approach," Regional Science and Urban Economics, Elsevier, vol. 69(C), pages 11-24.
    16. Thorsten Beck & Ross Levine, 2008. "Legal Institutions and Financial Development," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 11, pages 251-278, Springer.
    17. Maddalena Galardo & Maurizio Lozzi & Paolo Emilio Mistrulli, 2019. "Credit supply, uncertainty and trust: the role of social capital," Temi di discussione (Economic working papers) 1245, Bank of Italy, Economic Research and International Relations Area.
    18. Algan, Yann & Cahuc, Pierre, 2014. "Trust, Growth, and Well-Being: New Evidence and Policy Implications," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 49-120, Elsevier.
    19. Jeffrey V. Butler & Paola Giuliano & Luigi Guiso, 2016. "The Right Amount Of Trust," Journal of the European Economic Association, European Economic Association, vol. 14(5), pages 1155-1180, October.
    20. Marie Claire Villeval, 2019. "Comportements (non) éthiques et stratégies morales," Revue économique, Presses de Sciences-Po, vol. 70(6), pages 1021-1046.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jobhdp:v:166:y:2021:i:c:p:137-148. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/obhdp .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.