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The Government-Taxpayer Game

Author

Listed:
  • David CARFI

    (IAMIS, Institute for the Applications of Mathematics and Integrated Sciences Department of Mathematics, University of California at Riverside, USA)

  • Caterina FICI

    (Business Administrator at VF of V. Fici, Italy)

Abstract

In this paper, we model - quantitatively – a possible realistic interaction between a taxpayer and his Government. We formalize, in a general setting, this strategic interaction. Moreover, we analyze completely a particular realistic sample of the general model. We determine the entire payoff space of the sample game; we find the unique Nash equilibrium of the interaction; we determine the payoff Pareto maximal boundary, the conservative payoff zone and the conservative core of the game (part of Pareto boundary greater than the conservative payoff of the game). Finally, we suggest possible compromise solutions between the two players. From an economic point of view, the sample chosen gives an example of normative settings, for which, there is no reason (convenience), for the taxpayer, to evade the taxes or to declare less than his real income, when his behavior is conservative (defensive, risk-averse). Moreover, the two proposed compromise solutions (which realize the maximum collective gain) could be significantly applied to distinguished taxpayer (big companies and so on).

Suggested Citation

  • David CARFI & Caterina FICI, 2012. "The Government-Taxpayer Game," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 3(1), pages 13-25.
    • Handle: RePEc:srs:jtpref:v:3:y:2012:i:1:p:13-25
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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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