Payment Evasion

29 Pages Posted: 20 Dec 2017

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: December 2017

Abstract

This paper shows that a firm can use the purchase price and the fine imposed on detected payment evaders to discriminate between unobservable consumer types. Assuming that consumers self‐select into regular buyers and payment evaders, we show that the firm typically engages in second‐degree price discrimination in which the purchase price exceeds the expected fine. In addition, we find that higher fines do not necessarily reduce payment evasion. We illustrate with data from fare dodging on public transportation.

Suggested Citation

Buehler, Stefan and Halbheer, Daniel and Lechner, Michael, Payment Evasion (December 2017). The Journal of Industrial Economics, Vol. 65, Issue 4, pp. 804-832, 2017, Available at SSRN: https://ssrn.com/abstract=3090067 or http://dx.doi.org/10.1111/joie.12144

Stefan Buehler (Contact Author)

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

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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