Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96876
Authors: 
Lipatov, Vilen
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4767
Abstract: 
We study compliance dynamics generated by a large set of behavioral rules describing social interaction in a population of agents facing an enforcement authority. When the authority adjusts the auditing probability every period, cycling in cheating-auditing occurs: Intensive monitoring induces compliance, but with high compliance there is incentive for lax monitoring; with less monitoring, compliance starts decreasing, and then there is an incentive to intensify monitoring. Thus, the real life phenomenon of compliance fluctuations is ex-plained by the nature of social interaction process rather than by exogenous parameter shifts. For the authority committed to a fixed auditing probability, we derive a sufficient condition for fines to be effective means of deterrence. Our analysis can be applied, among others, to crime, tax evasion, safety regulations, employment and environmental protection.
Subjects: 
social interaction
compliance
random matching
behavioral rule
learning
JEL: 
C79
D83
H26
K42
Document Type: 
Working Paper

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