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Deterrence Through Word of Mouth

Author

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  • Johannes Rincke

    (University of Munich, Department of Economics, Seminar for Economic Policy)

  • Christian Traxler

    (Max Planck Institute for Research on Collective Goods, Bonn)

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.

Suggested Citation

  • Johannes Rincke & Christian Traxler, 2009. "Deterrence Through Word of Mouth," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2009_04, Max Planck Institute for Research on Collective Goods.
    • Handle: RePEc:mpg:wpaper:2009_04
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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," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2009_31, Max Planck Institute for Research on Collective Goods.
    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. Duha Altindag, 2014. "Crime and International Tourism," Journal of Labor Research, Springer, vol. 35(1), pages 1-14, March.
    4. Diana Onu & Lynne Oats, 2018. "Tax Talk: An Exploration of Online Discussions Among Taxpayers," Journal of Business Ethics, Springer, vol. 149(4), pages 931-944, June.
    5. George Saridakis & Sandra Sookram, 2014. "Violent Crime and Perceived Deterrence: An Empirical Approach using the Offending Crime and Justice Survey," Economic Issues Journal Articles, Economic Issues, vol. 19(1), pages 23-56, March.
    6. Traxler, Christian, 2012. "Majority voting and the welfare implications of tax avoidance," Journal of Public Economics, Elsevier, vol. 96(1), pages 1-9.
    7. 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.
    8. Gerlinde Fellner & Rupert Sausgruber & Christian Traxler, 2013. "Testing Enforcement Strategies In The Field: Threat, Moral Appeal And Social Information," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 634-660, June.
    9. Onu, Diana & Oats, Lynne, 2016. "“Paying tax is part of life”: Social norms and social influence in tax communications," Journal of Economic Behavior & Organization, Elsevier, vol. 124(C), pages 29-42.

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    More about this item

    Keywords

    Deterrence; Law enforcement; Word of mouth;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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