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Games, Volume 10, Issue 4 (December 2019)

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Open AccessArticle
Taxation with Mobile High-Income Agents: Experimental Evidence on Tax Compliance and Equity Perceptions
Games 2019, 10(4), 42; https://doi.org/10.3390/g10040042 - 11 Oct 2019
Viewed by 138
Abstract
In a laboratory experiment on tax compliance, we model a situation in which high-income taxpayers can leave a tax system that finances a public good. We compare low-income taxpayers’ compliance decisions and equity perceptions across treatments in which they are informed or not [...] Read more.
In a laboratory experiment on tax compliance, we model a situation in which high-income taxpayers can leave a tax system that finances a public good. We compare low-income taxpayers’ compliance decisions and equity perceptions across treatments in which they are informed or not informed about the mobility option of high-income taxpayers. This allows us to test if low-income taxpayers regard the mobility option as a rationale for implementing a regressive tax schedule. To investigate if a potential ‘justification effect’ of the mobility option depends on the causes of income heterogeneity, we also varied whether income was allocated based on relative performance in a prior ability task or at random. Interestingly, although the performance-based allocation itself was judged to be fairer, we observed higher compliance under the random allocation mechanism. However, compliance and equity perceptions did not significantly differ by the information treatment variation, regardless of the source of income inequality. The results indicate that the threat of losing high-income taxpayers’ contributions does not lead low-income taxpayers to view the regressive tax schedule more favorably. This suggests that taking the differential mobility options as given and altering tax schedules accordingly may not be perceived as an adequate policy response. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
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Open AccessArticle
On the Collective Choice among Models of Social Protection: An Experimental Study
Games 2019, 10(4), 41; https://doi.org/10.3390/g10040041 - 11 Oct 2019
Viewed by 106
Abstract
A real-effort experiment is conducted in order to detect preferences for one out of three different models of the Welfare State characterized by different tax-and-transfer schemes. We reproduce a small society in the lab where: Subjects are grouped in three stylized classes (the [...] Read more.
A real-effort experiment is conducted in order to detect preferences for one out of three different models of the Welfare State characterized by different tax-and-transfer schemes. We reproduce a small society in the lab where: Subjects are grouped in three stylized classes (the rich, the middle class and the poor) on the basis of their performance in a real-effort activity; income and risk are assigned according to the class; tax revenue is spent to refund unlucky people and to provide a public good. Experimental subjects must choose (both under and without a veil of ignorance concerning their position in the society created in the lab) among (a) a baseline proportional scheme, where the State is neutral with respect to risk heterogeneity; (b) an actuarially fair scheme where low ability and low earnings subjects bear full individual responsibility for risk exposure and (c) a progressive scheme where mutual risk insurance spreads risk across all subjects such that low ability and low earnings individuals are compensated. Our most relevant finding is that preference is motivated less by a justice principle and more by self-interested considerations on the expectations surrounding one’s own position in the society. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
Open AccessArticle
A Bayesian Method for Characterizing Population Heterogeneity
Games 2019, 10(4), 40; https://doi.org/10.3390/g10040040 - 09 Oct 2019
Viewed by 131
Abstract
A stylized fact from laboratory experiments is that there is much heterogeneity in human behavior. We present and demonstrate a computationally practical non-parametric Bayesian method for characterizing this heterogeneity. In addition, we define the concept of behaviorally distinguishable parameter vectors, and use the [...] Read more.
A stylized fact from laboratory experiments is that there is much heterogeneity in human behavior. We present and demonstrate a computationally practical non-parametric Bayesian method for characterizing this heterogeneity. In addition, we define the concept of behaviorally distinguishable parameter vectors, and use the Bayesian posterior to say what proportion of the population lies in meaningful regions. These methods are then demonstrated using laboratory data on lottery choices and the rank-dependent expected utility model. In contrast to other analyses, we find that 79% of the subject population is not behaviorally distinguishable from the ordinary expected utility model. Full article
(This article belongs to the Special Issue The Empirics of Behaviour under Risk and Ambiguity)
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Open AccessArticle
Conflict without an Apparent Cause
Games 2019, 10(4), 39; https://doi.org/10.3390/g10040039 - 02 Oct 2019
Viewed by 225
Abstract
A game-theoretic model of repeated interaction between two potential adversaries is analyzed to illustrate how conflict could possibly arise from rational decision-makers endogenously processing information, without any exogenous changes to the fundamentals of the environment. This occurs as a result of a convergence [...] Read more.
A game-theoretic model of repeated interaction between two potential adversaries is analyzed to illustrate how conflict could possibly arise from rational decision-makers endogenously processing information, without any exogenous changes to the fundamentals of the environment. This occurs as a result of a convergence of beliefs about the true state of the world by the two players. During each period, each adversary must decide to either stage an attack or not. Conflict ensues if either player chooses to initiate an attack. Choosing to not stage an attack in a given period reveals information to the player’s rival. Thus, over time, beliefs about the true state of the world converge. Depending upon the true state of the world, we can ultimately have either of the two adversaries initiating an attack (either with or without regret) after an arbitrarily long period of tranquility. When this happens, it is as if conflict has suddenly arisen without any apparent cause or impetus. Alternatively (again, depending upon the true state of the world), we could possibly have beliefs converge to a point where neither adversary wants to initiate conflict. Full article
Open AccessArticle
Learning (Not) to Evade Taxes
Games 2019, 10(4), 38; https://doi.org/10.3390/g10040038 - 29 Sep 2019
Viewed by 203
Abstract
In this paper, lab experiments on tax compliance were theoretically investigated with dynamic and stochastic methods. It is well known from experimental games that learning allows a better understanding of participants’ behavior. However, it has not been explicitly applied so far in the [...] Read more.
In this paper, lab experiments on tax compliance were theoretically investigated with dynamic and stochastic methods. It is well known from experimental games that learning allows a better understanding of participants’ behavior. However, it has not been explicitly applied so far in the theoretical analysis of tax compliance experiments. In this paper, it was shown that two decision-making processes may be distinguished: a discrete process in which all options are regarded and an all-or-nothing process in which either the respective tax is paid fully or not at all. The corresponding variant of the learning model was either a stochastic or a deterministic one, with the stochastic version as the more general model. In the additional empirical part of the paper, it was shown that tax payments decline in trend over the rounds of the considered experiment. This negative trend was interpreted as a learning effect, in accordance with the stochastic version of the theoretical model. However, the alternative interpretation that the observed behavior was driven by a tiring effect cannot be completely excluded. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
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Open AccessArticle
A Game-Free Microfoundation of Mutual Optimism
Games 2019, 10(4), 37; https://doi.org/10.3390/g10040037 - 27 Sep 2019
Viewed by 215
Abstract
One of the most widely accepted explanations for why wars occur despite its Pareto-suboptimality is mutual optimism: if both sides expect to gain a lot by fighting, war becomes inevitable. The literature on mutual optimism typically assumes mutually optimistic beliefs and shows that, [...] Read more.
One of the most widely accepted explanations for why wars occur despite its Pareto-suboptimality is mutual optimism: if both sides expect to gain a lot by fighting, war becomes inevitable. The literature on mutual optimism typically assumes mutually optimistic beliefs and shows that, under such an assumption, war may occur despite its Pareto-suboptimality. In a war–peace model, we show that, if players neglect the correlation between other players’ actions and their types—a well-established concept in economics—then players’ expected payoffs from war increase relative to conventional informational sophistication predictions, hence providing a microfoundation of mutual optimism. Full article
(This article belongs to the Special Issue Political Games: Strategy, Persuasion, and Learning)
Open AccessArticle
Emotion and Knowledge in Decision Making under Uncertainty
Games 2019, 10(4), 36; https://doi.org/10.3390/g10040036 - 27 Sep 2019
Viewed by 216
Abstract
This paper presents four incentivised experiments analysing jointly the separate role of immediate integral emotions and knowledge in individual decision making under ambiguity. Reactions to a natural source of uncertainty (i.e., forthcoming real-world election results) were measured using both computed decision weights derived [...] Read more.
This paper presents four incentivised experiments analysing jointly the separate role of immediate integral emotions and knowledge in individual decision making under ambiguity. Reactions to a natural source of uncertainty (i.e., forthcoming real-world election results) were measured using both computed decision weights derived from individual choices and judgmental probabilities determined from the subjects’ estimated likelihood of election outcomes. This study used self-reports to measure emotions aroused by the prospective election victory of a party/coalition of parties, and both self-assessed and actual competence to measure knowledge of politics. This paper found evidence of both preference for ambiguity in the gain domain and of likelihood insensitivity, namely the tendency to overweight unlikely events and to underweight likely events. This paper also shows that a superior knowledge of politics was associated with a preference for ambiguity (i.e., the elevation of the decision weighting function for gains). Both stronger positive emotions and superior knowledge generally have asymmetric effects on likelihood insensitivity (i.e., the curvature of the decision weighting function), each being associated separately with higher overweighting of unlikely election outcomes. Full article
(This article belongs to the Special Issue The Empirics of Behaviour under Risk and Ambiguity)
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