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Global Inspection Games (GIG) in the laboratory

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  • Sanchez Villalba, Miguel

Abstract

Sanchez Villalba (2015) claims inspection games can be modelled as global games when agents face common shocks. For the tax evasion game -his leading example- he prescribes that the tax agency should audit each individual taxpayer with a probability that is a non-decreasing function of every other taxpayer's declarations ("relative auditing strategy"). This paper uses experimental data to test the predictions of the model and finds supporting evidence for the hypothesis that the relative auditing strategy is superior to the alternative "cut-off" one. It also finds that data fit the qualitative predictions of the global game model, regarding both participants' decisions and the experiment's comparative statics.

Suggested Citation

  • Sanchez Villalba, Miguel, 2017. "Global Inspection Games (GIG) in the laboratory," MPRA Paper 80715, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:80715
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    File URL: https://mpra.ub.uni-muenchen.de/80715/1/MPRA_paper_80715.pdf
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    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, March.
    2. Reinhard Selten & Abdolkarim Sadrieh & Klaus Abbink, 1999. "Money Does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse," Theory and Decision, Springer, vol. 46(3), pages 213-252, June.
    3. Peter Ockenfels & Rosemarie Nagel & Frank Heinemann, 2002. "Speculative Attacks and Financial Architecture: Experimental Analysis of Coordination Games with Public and Private Information," FMG Discussion Papers dp416, Financial Markets Group.
    4. Antoni Bosch-Domènech & José G. Montalvo & Rosemarie Nagel & Albert Satorra, 2002. "One, Two, (Three), Infinity, ...: Newspaper and Lab Beauty-Contest Experiments," American Economic Review, American Economic Association, vol. 92(5), pages 1687-1701, December.
    5. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September.
    6. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2009. "Measuring Strategic Uncertainty in Coordination Games," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 181-221.
    7. Antonio Cabrales & Rosemarie Nagel & Roc Armenter, 2007. "Equilibrium selection through incomplete information in coordination games: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 10(3), pages 221-234, September.
    8. Reinganum, Jennifer F. & Wilde, Louis L., 1985. "Income tax compliance in a principal-agent framework," Journal of Public Economics, Elsevier, vol. 26(1), pages 1-18, February.
    9. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
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    11. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    12. Stahl, Dale II & Wilson, Paul W., 1994. "Experimental evidence on players' models of other players," Journal of Economic Behavior & Organization, Elsevier, vol. 25(3), pages 309-327, December.
    13. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    14. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica, Econometric Society, vol. 72(5), pages 1583-1599, September.
    15. Alm, James & McKee, Michael, 2004. "Tax compliance as a coordination game," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 297-312, July.
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    More about this item

    Keywords

    Global Games; Experimental Economics; Tax Evasion; Rationality; Information; Beliefs;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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