Compliance Dynamics Generated by Social Interaction Rules
AbstractWe 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.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4767.
Date of creation: 2014
Date of revision:
social interaction; compliance; random matching; behavioral rule; learning;
Find related papers by JEL classification:
- C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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