Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86541
Authors: 
Pruzhansky, Vitaly
Year of Publication: 
2004
Series/Report no.: 
Tinbergen Institute Discussion Paper 04-022/1
Abstract: 
We study the phenomenon of tax evasion using a simple signaling model, in which the signal is taxpayer's reported income. The novelty of our approach lies in the way we define honesty. Specifically, we advocate the view that there are no absolutely honest taxpayers: all taxpayers may under certain conditions become evaders. We investigate the implications of this type of honesty on the equilibria of the model, and compare it to the basic case, in which honesty is absent. Our analysis completely characterizes all perfect Bayesian Nash equilibria of the game, assesses their stability and welfare properties.
Subjects: 
Auditing
equilibrium refinements
tax morale
underground economies
JEL: 
C72
H26
Document Type: 
Working Paper

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