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Deterrence through Word of Mouth

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  • Johannes Rincke
  • Christian Traxler

Abstract

The deterrent effect of law enforcement rests on the link between the actual and the perceived detection risk. We study the role of word of mouth for this linkage. Our approach makes use of micro data on compliance with TV license fees allowing us to distinguish between households who have been subject to enforcement and those who have not. Exploiting local variation in field inspectors’ efforts induced by snowfall, we find a striking response of households to increased enforcement in their vicinity, with compliance rising significantly among those who had no interaction with inspectors. As we can exclude other channels of information transmission, our finding establishes a substantial deterrent effect mediated by word of mouth.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-02/cesifo1_wp2549.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2549.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2549

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Keywords: deterrence; law enforcement; word of mouth;

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References

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  1. Camerer, Colin, et al, 1997. "Labor Supply of New York City Cabdrivers: One Day at a Time," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 407-41, May.
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  16. Donald W.K. Andrews & James H. Stock, 2005. "Inference with Weak Instruments," NBER Technical Working Papers 0313, National Bureau of Economic Research, Inc.
  17. Levitt, Steven D, 1998. "Why Do Increased Arrest Rates Appear to Reduce Crime: Deterrence, Incapacitation, or Measurement Error?," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 353-72, July.
  18. Claude Montmarquette & Marc Nerlove, 1981. "Deterrence and Delinquency: An Analysis of Individual Data," Discussion Papers 509, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Cited by:
  1. Gerlinde Fellner & Rupert Sausgruber & Christian Traxler, 2009. "Testing Enforcement Strategies in the Field: Legal Threat, Moral Appeal and Social Information," NRN working papers 2009-23, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  2. Naci Mocan & Kaj Gittings, 2010. "The Impact of Incentives on Human Behavior: Can We Make it Disappear? The Case of the Death Penalty," NBER Chapters, in: The Economics of Crime: Lessons for and from Latin America, pages 379-418 National Bureau of Economic Research, Inc.
  3. Trautmann, Stefan T. & Vlahu, Razvan, 2013. "Strategic loan defaults and coordination: An experimental analysis," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 747-760.
  4. Duha T. Altindag, 2014. "Crime and International Tourism," Auburn Economics Working Paper Series auwp2014-01, Department of Economics, Auburn University.

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