Free Riding and Collective Action: An Experiment in Public Microeconomics

The well-known free-rider hypothesis is examined experimentally to see (i) whether individuals behave systematically as free riders when systematic incentives to do so are created, and (ii) the extent to which free riding actually occurs. Though the experiment's participants behaved in accordance with the hypothesis, the quantitative extent to which such behavior occurred was rather modest. From this it may be concluded that the free-rider hypothesis as presently stated indicates an incompleteness in standard public microeconomics rather than providing a description of the real worl

Valuation of aircraft noise by time of day: a comparison of two approaches

This paper reports an innovative application of stated preference techniques to derive values of aircraft noise by time of day and day of week. Revealed preference techniques cannot provide such segmentations which would clearly be of use in policy development especially relating to airport operations. Given the lack of research on this issue the work reported here is highly experimental. Two stated preference experiments were designed. The first focussed on a single time period whilst the second asked respondents to trade between time periods. Both approaches yielded results that are plausible and mutually consistent in terms of relative values by time period. We conclude that stated preference techniques are particularly useful in this context where the use of aggregated values may lead to non-optimal policy decisions

Introducing willingness-to-pay for noise changes into transport appraisal: an application of benefit transfer.

Numerous research studies have elicited willingness-to-pay values for transport-related noise, however, in many industrialised countries including the UK, noise costs and benefits are still not incorporated into appraisals for most transport projects and policy changes (Odgaard et al, 2005; Grant-Muller et al, 2001). This paper describes the actions recently taken in the UK to address this issue, comprising: primary research based on the city of Birmingham; an international review of willingness-to-pay evidence; development of values using benefit transfers over time and locations; and integration with appraisal methods. Amongst the main findings are: that the willingness-to-pay estimates derived for the UK are broadly comparable with those used in appraisal elsewhere in Europe; that there is a case for a lower threshold at 1 45dB(A)Leq,18hr1 rather than the more conventional 55dB(A); and that values per dB(A) increase with the noise level above this threshold. There are significant issues over the valuation of rail versus road noise, the neglect of non-residential noise and the valuation of high noise levels in different countries. Conclusions are drawn regarding the feasibility of noise valuation based on benefit transfers in the UK and elsewhere, and future research needs in this field are discussed

Prospect theory and tax evasion: a reconsideration of the Yitzhaki puzzle

The standard expected utility (EUT) model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki puzzle). Recent literature shows cases in which incorporating prospect theory (PT) does and does not overturn the Puzzle. In a general environment that nests both PT and EUT preferences, we provide a detailed study of how the elements of PT affect the Puzzle. PT does not always reverse the Puzzle, hence we give and interpret conditions for when it does and does not. When allowing for stigma and/or variable audit probability, PT reverses the Puzzle in the same way and with the same limitations as does EUT, if equally augmented

Does the sole description of a tax authority affect tax evasion? The impact of described coercive and legitimate power.

Following the classic economic model of tax evasion, taxpayers base their tax decisions on economic determinants, like fine rate and audit probability. Empirical findings on the relationship between economic key determinants and tax evasion are inconsistent and suggest that taxpayers may rather rely on their beliefs about tax authority’s power. Descriptions of the tax authority’s power may affect taxpayers’ beliefs and as such tax evasion. Experiment 1 investigates the impact of fines and beliefs regarding tax authority’s power on tax evasion. Experiments 2-4 are conducted to examine the effect of varying descriptions about a tax authority’s power on participants’ beliefs and respective tax evasion. It is investigated whether tax evasion is influenced by the description of an authority wielding coercive power (Experiment 2), legitimate power (Experiment 3), and coercive and legitimate power combined (Experiment 4). Further, it is examined whether a contrast of the description of power (low to high power; high to low power) impacts tax evasion (Experiments 2-4). Results show that the amount of fine does not impact tax payments, whereas participants’ beliefs regarding tax authority’s power significantly shape compliance decisions. Descriptions of high coercive power as well as high legitimate power affect beliefs about tax authority’s power and positively impact tax honesty. This effect still holds if both qualities of power are applied simultaneously. The contrast of descriptions has little impact on tax evasion. The current study indicates that descriptions of the tax authority, e.g., in information brochures and media reports, have more influence on beliefs and tax payments than information on fine rates. Methodically, these considerations become particularly important when descriptions or vignettes are used besides objective information