Abstract
The concentration of high-frequency controls in a limited period of time (“crackdowns”) constitutes an important feature of many law-enforcement policies around the world. In this paper, we offer a comprehensive investigation on the relative efficiency and effectiveness of various crackdown policies using a lab-in-the-field experiment with real passengers of a public transport service. We introduce a novel game, the daily public transportation game, where subjects have to decide, over many periods, whether to buy or not a ticket knowing that there might be a control. Our results show that (a) concentrated crackdowns are less effective and efficient than random controls; (b) prolonged crackdowns reduce fare-dodging during the period of intense monitoring but induce a burst of fraud as soon as they are withdrawn; (c) pre-announced controls induce more fraud in the periods without control. Overall, we also observe that real fare-dodgers fraud more in the experiment than non-fare-dodgers.
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Notes
These studies either did not explicitly compare the efficiency and effectiveness of a crackdown policy to an alternative mechanism of crime prevention such as random controls (Di Tella and Schargrodsky 2003, 2004; Banuri and Eckel 2015) or they vary at the same time other things than just the concentration of controls (Dai et al. 2015; Kastlunger et al. 2009). For instance, Dai et al. (2015) also vary the total number of audits, while Kastlunger et al. (2009) indirectly change subjects’ expectation of an audit by informing them in advance of the overall probability of being audited.
In the city where this study was conducted, the price of the ticket was, at the time, €1.70.
See, for example, Dai et al. (2015) for a discussion on related studies.
To strengthen the link of our experiment with the real world, we also frame the experimental setting in terms of the natural environment where these subjects take decisions about public transportation. This also facilitated the comprehension of the instructions for participants who possessed very different socio-economic and educational backgrounds.
We acknowledge that there are a few studies in the literature on tax evasion that investigate the effect of sending threat-of-audit letters (e.g. Slemrod et al. 2001; Kleven et al. 2011; Fiorio et al. 2013). What is usually found is that informing people about the audit activity has a positive and statistically significant effect on tax compliance. More relevant for us are the experimental studies of Alm and McKee (2006) and Alm et al. (2009) on tax evasion. Alm and McKee (2006) show experimentally that, when some individuals are informed in advance of an audit while others are informed that they will not be audited, the pre-announcement increases the compliance of those informed they will be audited but the overall compliance falls. Alm et al. (2009) consider different ways in which information regarding the audit activity can be transmitted ex-ante and ex-post to the taxpayers. They ran sessions where the audit probability was pre-announced and sessions where it was not, and found that compliance was on average lower in the former. However, differently from our experiment, both Alm and McKee (2006) and Alm et al. (2009) do not consider periods of durable controls (i.e., crackdowns). In addition, they only focus on the immediate effects of pre-announcement while we are interested in both the immediate and long-term effects of crackdowns.
We asked subjects to make several decisions under different audit probabilities and fines.
The order in which subjects made their choices was kept fixed to facilitate decision-making and avoid confusion.
Giving an initial endowment of cash to the subjects to prevent a loss is a standard practice in experimental economics to avoid bankruptcy (see Friedman and Sunder 1994). We acknowledge that this initial endowment may result in a house money effect that may affect the extent to which people are willing to cheat in the experiment. However, as the main aim of this study is to compare the efficiency and effectiveness of different policies across treatments, if this house money effect exists, it should be similar across treatments. Thus, it should not bias our between-treatment comparisons.
We however refrain from using strong terminology which could lead to experimenter demand effects.
This was also equivalent to the real cost of using a public transport in the French city where the experiment took place.
The reason why we started the crackdown in day 3 and day 33 is that we did not want subjects to easily learn the occurrence of an audit.
If the audit probability was known, rational and risk-neutral agents should always choose to buy a ticket since the payoff would be higher than not to buy a ticket.
To maximize the representativeness of our sample pool, we adopted a stratified random procedure of recruitment based on the information collected by the local public transport agency TCL-Sytral in a 2014 compulsory survey. Compared to this representative sample, our subject pool differs mainly in terms of age (we did not recruit minors, we slightly over-represented passengers from 18 to 24 years old, and under-represented passengers older than 60) and status (we over-represented unemployed people and under-represented white collars and retirees). See Dai et al. (2016) for a detailed discussion on this point. It is, of course, possible that our sample, compared to the reference statistical population, differed in other unobservable dimensions (e.g., impatient people might be less likely to participate in this study), for which, however, we do not have a control.
After having been punched, a ticket is valid for 1 h. Hence, it was entirely legitimate and credible to compensate a ticket-holding subject with a new ticket for the time spent in the lab.
In the questionnaire, they were asked to report how often (from 0 to 10) they travel without a valid ticket out of 10 trips.
An alternative procedure would be that of relying only on one of the three measures. The risk is of course that of underestimating the number of fare-dodgers.
The lab was also near the tram and bus stop (about 100 m from the stop).
The opposite is likely to be true, that is subjects who self-reported as non-fare-dodgers were actually fare-dodgers.
We believe these are more likely to be occasional fare-dodgers.
The number of actual fare-dodgers varies between 61 % (C_Long1) to 79 % (RR).
The higher the value, the less risk averse the subject is.
The results remain qualitatively the same if we drop these demographic variables.
A crackdown ran from day 3 (33) until day 8 (38) but its effect operated from day 4 (34) until day 9 (39). In other words, the effect of a crackdown was 1-day delayed. This is because subjects were not informed in advance of a crackdown. There is however an exception: in the CC_A treatment, the control was pre-announced and, therefore, the effect and execution of a crackdown coincided. For this treatment, crackdown days are 3–8 and 33–38. This is taken into account in Fig. 3.
We also find that older subjects, as well as educated subjects, are less likely to fraud in our game. These effects should be however interpreted with caution. Note in fact that these demographics correlate with being a fraudster in the field. So part of their effects is captured by the variable “Fare-dodgers”.
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We are extremely grateful to P. Jacquesson, R. Sauter and F. German from Keolis and to D. Aubaret and L. Clerc-Gagnoux from Kisio for enabling the realization of this experiment with passengers of the public transportation company in Lyon. We wish to thank an anonymous reviewer and seminar and conference participants in Paris (6th Annual Meeting of ASFEE), Heidelberg (ESA European Meeting), Lyon (6th Annual SEBA-GATE Workshop), and Norwich (CREED-CeDEx-CBESS Meeting). We are very grateful to ASFEE for awarding its Best Paper Award 2015 to this article. We also thank Q. Thevenet for programming the experiment and S. Belhadj, L. Charroin, and A. Solda for research assistance. This research has been supported by a grant from Keolis, a grant of the French National Research Agency (ANR, FELIS Grant, ANR-14-CE28-0010-01), and funding from the European Commission (Marie Skłodowska-Curie Individual Fellowship, 661645-IDEA-MSCA-IF-EF-ST). It was performed within the framework of the LABEX CORTEX (ANR-11-LABX-0042) of Université de Lyon, within the program Investissements d’Avenir (ANR-11-IDEX-007) operated by the French National Research Agency (ANR).
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Dai, Z., Galeotti, F. & Villeval, M.C. The efficiency of crackdowns: a lab-in-the-field experiment in public transportations. Theory Decis 82, 249–271 (2017). https://doi.org/10.1007/s11238-016-9561-0
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DOI: https://doi.org/10.1007/s11238-016-9561-0