Steeve Mongrain

Joint Tax Evasion

Tax evasion analysis typically assumes that evasion involves individual taxpayers responding to some given policies. However, evading taxes could require the collaboration of at least two taxpayers. Detection depends on the costly avoidance activities of both transacting partners. An increase in sanctions leads to a direct increase in the expected cost of a transaction in the illegal sector, but it may also increase the incentive for the partners to cooperate in avoiding detection. The total cost of transacting in the illegal sector can fall, and tax evasion may increase. The policy implications of this phenomenon are considered.

Amnesties and Co-operation

One of the costs of anticipated amnesties is current and future non-compliance with the law. Relatively to a no-amnesty situation, efficient enforcement policies may therefore differ when an amnesty is offered. To study this question, a model is built in which individuals impose a cost on society when they commit a crime. When a criminal participates in an amnesty, or (to a lesser extent) when he is caught, some fraction of the social cost is recovered, reflecting co-operation with the authorities. The analysis characterizes efficient anticipated amnesties. It is shown that the efficient level of enforcement may be smaller in the case of an anticipated amnesty than in a no-amnesty situation. The reason is that despite the increase in the initial number of criminals generated by the amnesty, many criminals eventually participate in it. If participants in the amnesty are very co-operative, then a large proportion of the social cost is recovered making the initial increase in the number of criminals less costly. The optimal level of the reduced sanction imposed on those who participate in the amnesty is also characterized.

What is a criminal organization and why does the law care

The Criminal Codes in both Canada and the United States allow for criminals to be penalized to a greater degree if they are a member of an organization. We draw on the economic theory of punishment, which states that expected penalty should be proportional to the social harm caused, to put a different perspective on such regulations. According to the economic theory, additional punishments are desirable if either: (1) the social harm from a criminal act is greater for a member of an organization than for an independent criminal; or (2) the probability of conviction is lower. We examine the extent to which both of these possibilities are true and use the findings to revisit the definition of a criminal organization.

Rational Truth-Avoidance and Self-Esteem

We assume that people have beliefs about their abilities, that these generate self-esteem, and that self-esteem is valued intrinsically. Individuals face two choices; one of which strictly dominates the other in a pecuniary sense, but necessarily involves gathering information concerning ones (unobserved) ability. We lay out the circumstances under which an individual may find it rational to reject the dominant choice; an act which, in social psychology is described as avoiding the situation, but which we label truth-avoidance. We find that the incentive to avoid the truth is increasing in income and decreasing in self-esteem, the perceived accuracy of ones self-assessment, and the role which luck plays in generating opportunities.

Paying for Express Checkout: Competition and Price Discrimination in Multi-Server Queuing Systems

We model competition between two firms selling identical goods to customers who arrive in the market stochastically. Shoppers choose where to purchase based upon both price and the time cost associated with waiting for service. One seller provides two separate queues, each with its own server, while the other seller has a single queue and server. We explore the market impact of the multi-server seller engaging in waiting cost-based-price discrimination by charging a premium for express checkout. Specifically, we analyze this situation computationally and through the use of controlled laboratory experiments. We find that this form of price discrimination is harmful to sellers and beneficial to consumers. When the two-queue seller offers express checkout for impatient customers, the single queue seller focuses on the patient shoppers thereby driving down prices and profits while increasing consumer surplus.