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The role of preference observability.

The role of preference observability.

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We relate tax evasion behavior to a substantial literature on social comparison in judgements. Taxpayers engage in tax evasion as a means to boost their expected consumption relative to others in their social network. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpaye...

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... the presence of imperfect preference information we see ( Fig. 3 ) that, even when the social network is fully observed ( κ = 1 ), the tax authority does not achieve the maximal audit revenue. The qualitative shape of ( κ) remains as in Fig. 1 , however. ...

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