Payment Evasion

27 Pages Posted: 19 May 2015

See all articles by Stefan Buehler

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences

Daniel Halbheer

HEC Paris - Marketing

Michael Lechner

University of St. Gallen - Swiss Institute for Empirical Economic Research

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Date Written: May 19, 2015

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.

Keywords: pricing, fine, price discrimination, deterrence

JEL Classification: L120

Suggested Citation

Buehler, Stefan and Halbheer, Daniel and Lechner, Michael, Payment Evasion (May 19, 2015). CESifo Working Paper Series No. 5342, Available at SSRN: https://ssrn.com/abstract=2607935

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

FGN-HSG
Varnbuelstr. 19
CH-9000 St. Gallen
Switzerland
+41-71-224-2303 (Phone)

Daniel Halbheer (Contact Author)

HEC Paris - Marketing ( email )

Paris
France

Michael Lechner

University of St. Gallen - Swiss Institute for Empirical Economic Research ( email )

Varnbuelstrasse 14
St. Gallen, 9000
Switzerland
+41 71 224 2320 (Phone)

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