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Payment Evasion

Author

Listed:
  • Stefan Buehler
  • Daniel Halbheer
  • Michael Lechner
Abstract
This paper shows that a firm can use the purchase price and the fine imposed on detected payment evaders to discriminate between unobservable consumer types. Assuming that consumers self†select into regular buyers and payment evaders, we show that the firm typically engages in second†degree price discrimination in which the purchase price exceeds the expected fine. In addition, we find that higher fines do not necessarily reduce payment evasion. We illustrate with data from fare dodging on public transportation.

Suggested Citation

  • Stefan Buehler & Daniel Halbheer & Michael Lechner, 2017. "Payment Evasion," Journal of Industrial Economics, Wiley Blackwell, vol. 65(4), pages 804-832, December.
    • Handle: RePEc:bla:jindec:v:65:y:2017:i:4:p:804-832
    DOI: 10.1111/joie.12144
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    References listed on IDEAS

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    Cited by:

    1. Boyd, Colin, 2020. "Revisiting the foundations of fare evasion research," Transportation Research Part A: Policy and Practice, Elsevier, vol. 137(C), pages 313-324.
    2. 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.
    3. 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.
    4. 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.
    5. 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.

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    More about this item

    JEL classification:

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

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