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Payment Evasion

Author

Listed:
  • Stefan Buehler
  • Daniel Halbheer
  • Michael Lechner

Abstract

This paper models payment evasion as a source of profit by letting the firm choose the purchase price and the fine imposed on detected payment evaders. For a given price and fine, the consumers purchase, evade payment, or choose the outside option. We show that payment evasion leads to a form of second-degree price discrimination in which the purchase price exceeds the expected fine faced by payment evaders. We also show that higher fines do not necessarily reduce payment evasion. Using data on fare dodging on public transportation, we quantify expected fines and payment evasion.

Suggested Citation

  • Stefan Buehler & Daniel Halbheer & Michael Lechner, 2015. "Payment Evasion," CESifo Working Paper Series 5342, CESifo.
    • Handle: RePEc:ces:ceswps:_5342
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    References listed on IDEAS

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    Cited by:

    1. Boyd, Colin, 2020. "Revisiting the foundations of fare evasion research," Transportation Research Part A: Policy and Practice, Elsevier, vol. 137(C), pages 313-324.
    2. Zhixin Dai & Fabio Galeotti & Marie Claire Villeval, 2018. "Cheating in the Lab Predicts Fraud in the Field: An Experiment in Public Transportation," Management Science, INFORMS, vol. 64(3), pages 1081-1100, March.
    3. Buehler, Stefan & Eschenbaum, Nicolas, 2020. "Explaining escalating prices and fines: A unified approach," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 153-164.
    4. Benedetto Barabino & Cristian Lai & Alessandro Olivo, 2020. "Fare evasion in public transport systems: a review of the literature," Public Transport, Springer, vol. 12(1), pages 27-88, March.
    5. Buehler, Stefan & Nicolas Eschenbaum, 2018. "Explaining Escalating Fines and Prices: The Curse of Positive Selection," Economics Working Paper Series 1807, University of St. Gallen, School of Economics and Political Science.

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    More about this item

    Keywords

    pricing; fine; price discrimination; deterrence;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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