We test the Reduction of Compound Lotteries Axiom (RCLA) in an experiment on tax compliance. We disentangle the compound probability of audit and detection and test it against a more realistic situation with a probability of audit and a subsequent probability of detection. Various experiments have shown that abstract framing often leads to violations of the RCLA; our framed set-up also reveals statistically significant departures from the RCLA. We find that subjects comply more in the two-stage lottery set-up than they do in the one-stage equivalent and that violations are compatible with subjects applying different weighting functions to one-stage lotteries versus two-stage lotteries: inverse S-shaped - likelihood insensitive - in the former set-up; and significantly less insensitive in the latter. Violations substantially decline with subjects’ experience but not at the same rate for all groups of subjects.

Catch Me If You Can: Testing the reduction of compound lotteries axiom in a tax compliance experiment

Bernasconi M.
;
Bernhofer J.
2020-01-01

Abstract

We test the Reduction of Compound Lotteries Axiom (RCLA) in an experiment on tax compliance. We disentangle the compound probability of audit and detection and test it against a more realistic situation with a probability of audit and a subsequent probability of detection. Various experiments have shown that abstract framing often leads to violations of the RCLA; our framed set-up also reveals statistically significant departures from the RCLA. We find that subjects comply more in the two-stage lottery set-up than they do in the one-stage equivalent and that violations are compatible with subjects applying different weighting functions to one-stage lotteries versus two-stage lotteries: inverse S-shaped - likelihood insensitive - in the former set-up; and significantly less insensitive in the latter. Violations substantially decline with subjects’ experience but not at the same rate for all groups of subjects.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/3722606
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 8
  • ???jsp.display-item.citation.isi??? 7
social impact