Beat a Cheat: Hotlines to Taget the Poor
The problem with public spending programs intended for the poor is that they often enrich the ineligible. This paper introduces a hotline mechanism to target the poor efficiently. The poor are induced to tell on cheaters. The rich are deterred from cheating because they will be identified, audited and fined if they do so. This mechanism has a unique Nash equilibrium outcome and is robust to collusion. Unlike standard targeting techniques, it does not rely on the rich and poor having different preferences or abilities to select between them. Further, it resembles Beat A Cheat, a successful program to combat welfare fraud in Britain where informants call a toll free number to report welfare cheats.
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