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Signaling with Audits: Mimicry, Wasteful Expenditures, and Non-compliance in a Model of Tax Enforcement

Author

Listed:
  • Kotowski, Maciej H.

    (Harvard University)

  • Weisbach, David A.

    (University of Chicago)

  • Zeckhauser, Richard J.

    (Harvard University)

Abstract

The audit policy of a tax authority can signal its audit effectiveness. We model this process and show that in limited circumstances an ineffective authority can masquerade as being effective. We show that high maximal penalties imply underreporting of income.

Suggested Citation

  • Kotowski, Maciej H. & Weisbach, David A. & Zeckhauser, Richard J., 2014. "Signaling with Audits: Mimicry, Wasteful Expenditures, and Non-compliance in a Model of Tax Enforcement," Working Paper Series rwp14-001, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp14-001
    as

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    References listed on IDEAS

    as
    1. Kotowski, Maciej H. & Weisbach, David A. & Zeckhauser, Richard J., 2013. "Audits as Signals," Working Paper Series rwp2013-026, Harvard University, John F. Kennedy School of Government.
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    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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