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Payment Evasion

Author

Listed:
  • Halbheer , Daniel

  • Buehler , Stefan

Abstract

This paper models payment evasion as a source of profit by letting the firm choose the price charged to paying consumers and the fine collected from detected payment evaders. The consumers choose whether to purchase, evade payment, or refrain from consumption. The authors show that payment evasion allows the firm to charge a higher price to paying consumers and to generate a higher profit. The authors also show that higher fines do not necessarily reduce payment evasion. Finally, they provide empirical evidence which is consistent with their theoretical analysis, using comprehensive micro data on fare dodging on the Zurich Transport Network.

Suggested Citation

  • Halbheer , Daniel & Buehler , Stefan, 2014. "Payment Evasion," HEC Research Papers Series 1065, HEC Paris.
    • Handle: RePEc:ebg:heccah:1065
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    File URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2526722
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    Cited by:

    1. is not listed on IDEAS
    2. Buehler, Stefan & Nicolas Eschenbaum, 2018. "Explaining Escalating Fines and Prices: The Curse of Positive Selection," Economics Working Paper Series 1807, University of St. Gallen, School of Economics and Political Science.
    3. Zhixin Dai & Fabio Galeotti & Marie Claire Villeval, 2018. "Cheating in the Lab Predicts Fraud in the Field: An Experiment in Public Transportation," Management Science, INFORMS, vol. 64(3), pages 1081-1100, March.
    4. Boyd, Colin, 2020. "Revisiting the foundations of fare evasion research," Transportation Research Part A: Policy and Practice, Elsevier, vol. 137(C), pages 313-324.
    5. Buehler, Stefan & Eschenbaum, Nicolas, 2020. "Explaining escalating prices and fines: A unified approach," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 153-164.
    6. Benedetto Barabino & Cristian Lai & Alessandro Olivo, 2020. "Fare evasion in public transport systems: a review of the literature," Public Transport, Springer, vol. 12(1), pages 27-88, March.

    More about this item

    Keywords

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    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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