10 Questions
What is the effect of an increase in the probability of detection according to Figure 3?
The optimal choice moves closer to X = Y
How does an increase in the fine rate (F) affect evasion, as stated in the text?
The optimal choice moves closer to an honest declaration
What happens when the tax rate (t) increases, as discussed in Figure 5?
Tax evasion is reduced
Why does the Yitzhaki puzzle arise according to the text?
The puzzle arises from a pure income effect
In Prospect Theory, what conditions make it interesting?
'Loss' outcomes when not caught and 'gain' outcomes when caught
Why does the addition of loss aversion lead to a decrease in predicted evasion?
It reduces the weight given to the possibility of being caught.
How does the economic analysis of tax compliance using expected utility theory compare to real-world compliance?
It under-predicts real-world compliance.
What is Pareto Efficiency in the context of the Prisoner's Dilemma game?
A situation where no player can be made better off without making another player worse off.
What strategy characterizes Tit-for-Tat in a repeated game like the Prisoner's Dilemma?
Cheat if the opponent co-operated in the previous round.
What is a possible explanation for rational co-operation in repeated games?
'Rational irrationality' where players cooperate for public gains.
Explore the implications of tax evasion with a focus on detection probability and fine rates. Understand how different variables influence the decision to evade taxes and how they impact income declaration. Figure 3 demonstrates the effect of an increase in detection probability, while Figure 4 illustrates the impact of an increase in the fine rate.
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