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Journal of Dynamics and Games (JDG)
 

On the evolution of compliance and regulation with tax evading agents

Pages: 231 - 260, Volume 3, Issue 3, July 2016      doi:10.3934/jdg.2016013

 
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Yannis Petrohilos-Andrianos - Athens University of Economics and Business, Department of International and European Economic Studies, 76 Patission Street, GR 10434 Athens, Greece (email)
Anastasios Xepapadeas - Athens University of Economics and Business, Department of International and European Economic Studies, 76 Patission Street, GR 10434 Athens, Greece (email)

Abstract: We study the evolution of compliance and regulation with tax-evading agents, allowing for imitation rather than rationality in the evolution of available strategies distribution in the population. The general framework of the approach combines a classical model for tax evasion where agents are imitators rather than rational optimizers and form an endogenized subjective probability of audit. A regulator chooses values to available policy instruments, either myopically or optimally -within an optimal control setup-, always with respect to the behavior of agents. A comparison is drawn between the evolutionary and rational case in order to evaluate the differences that occur.

Keywords:  Tax evasion, replicator dynamics, optimization, regulation.
Mathematics Subject Classification:  Primary: 91A22, 91B55; JEL Classification: H26, C73.

Received: December 2015;      Revised: March 2016;      Available Online: July 2016.

 References