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Optimal Self-Reporting Schemes with Multiple Stages and Option Values

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  • Eberhard Feess

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  • Markus Walzl

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Abstract

We consider a model of optimal law enforcement where sanctions can be reduced for self-reporting individuals. We distinguish between a first self-reporting stage before the case is investigated and a second one where the criminal is detected, but not yet convicted. Since we assume that violators have private information in both stages, fine reductions for self-reporting individuals lead ceteris paribus to a higher violation frequency. Nevertheless, we show that fine reductions should be granted in both stages. We characterize the connection between the two fine reductions in the optimal policy and relate our results to self-reporting schemes observed in reality. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Eberhard Feess & Markus Walzl, 2005. "Optimal Self-Reporting Schemes with Multiple Stages and Option Values," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(3), pages 265-279, May.
  • Handle: RePEc:kap:itaxpf:v:12:y:2005:i:3:p:265-279
    DOI: 10.1007/s10797-005-0495-7
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:pubeco:v:151:y:2017:i:c:p:110-125 is not listed on IDEAS
    2. Langenmayr, Dominika, 2017. "Voluntary disclosure of evaded taxes — Increasing revenue, or increasing incentives to evade?," Journal of Public Economics, Elsevier, vol. 151(C), pages 110-125.
    3. Friehe, Tim & Tabbach, Avraham, 2013. "Preventive enforcement," International Review of Law and Economics, Elsevier, vol. 35(C), pages 1-12.
    4. repec:ebl:ecbull:v:11:y:2006:i:2:p:1-7 is not listed on IDEAS
    5. Matthew Gould & Matthew Rablen, 2016. "Voluntary Disclosure Schemes for Offshore Tax Evasion: An Analysis," CESifo Working Paper Series 5750, CESifo Group Munich.
    6. Lin, Shi-Woei, 2010. "Self-reporting mechanism for risk regulation," Journal of Business Research, Elsevier, vol. 63(5), pages 528-534, May.

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