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Payment Evasion
Author(s) -
Buehler Stefan,
Halbheer Daniel,
Lechner Michael
Publication year - 2017
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12144
Subject(s) - unobservable , evasion (ethics) , payment , business , microeconomics , price discrimination , economics , econometrics , finance , immune system , immunology , biology
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.