Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110837
Authors: 
Buehler, Stefan
Halbheer, Daniel
Lechner, Michael
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5342
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.
Subjects: 
pricing
fine
price discrimination
deterrence
JEL: 
L12
Document Type: 
Working Paper

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