Tax Compliance and Loss Aversion

2015 ◽  
Vol 7 (4) ◽  
pp. 132-164 ◽  
Author(s):  
Per Engström ◽  
Katarina Nordblom ◽  
Henry Ohlsson ◽  
Annika Persson
Keyword(s):  
Loss Aversion ◽  
Tax Compliance ◽  
Study Data ◽  
Reference Points ◽  
Causal Effects

We study if taxpayers are loss averse when filing returns. Preliminary deficits might be viewed as losses assuming zero preliminary balances as reference points. Swedish taxpayers can to try to escape such losses by claiming deductions after receiving information about the preliminary balance. Using a regression kink and discontinuity approach, we study data for 3.6 million Swedish taxpayers for 2006. There are strong causal effects of preliminary tax deficits on the probability of claiming deductions. Compliance will increase and auditing costs will be reduced if preliminary taxes are calibrated so that most taxpayers receive refunds. (JEL H24, H26)

scholarly journals Exposures associated with the onset of Kawasaki disease in infancy from the Japan Environment and Children’s Study

2021 ◽  
Vol 11 (1) ◽  
Author(s):  
Sayaka Fukuda ◽  
Shiro Tanaka ◽  
Chihiro Kawakami ◽  
Tohru Kobayashi ◽  
Shuichi Ito ◽  
...  
Keyword(s):  
Risk Factors ◽  
Kawasaki Disease ◽  
Systemic Vasculitis ◽  
First Trimester ◽  
Study Data ◽  
Causal Effects ◽  
Birth Cohort Study ◽  
Multivariate Logistic Regression ◽  
Maternal Thyroid ◽  
Infants And Young Children

AbstractKawasaki disease (KD) is an acute systemic vasculitis that mainly affects infants and young children. The etiology of KD has been discussed for several decades; however, no reproducible risk factors have yet been proven. We used the Japan Environment and Children’s Study data to explore the association between the causal effects of exposure during the fetal and neonatal periods and KD onset. The Japan Environment and Children’s Study, a nationwide birth cohort study, has followed approximately 100,000 children since 2011. We obtained data on exposures and outcomes from the first trimester to 12 months after birth. Finally, we included 90,486 children who were followed for 12 months. Among them, 343 children developed KD. Multivariate logistic regression revealed that insufficient intake of folic acid during pregnancy (odds ratio [OR], 1.37; 95% CI 1.08–1.74), maternal thyroid disease during pregnancy (OR, 2.03; 95% CI 1.04–3.94), and presence of siblings (OR, 1.33; 95% CI 1.06–1.67) were associated with KD onset in infancy. In this study, we identified three exposures as risk factors for KD. Further well-designed studies are needed to confirm a causal relationship between these exposures and KD onset.

scholarly journals Loss Aversion and Consumption Choice: Theory and Experimental Evidence

2015 ◽  
Vol 7 (2) ◽  
pp. 101-120 ◽  
Author(s):  
Heiko Karle ◽  
Georg Kirchsteiger ◽  
Martin Peitz
Keyword(s):  
Experimental Evidence ◽  
Loss Aversion ◽  
Consumer Choice ◽  
Rational Expectations ◽  
Choice Theory ◽  
Choice Model ◽  
Reference Points ◽  
Price Uncertainty ◽  
Theoretical Predictions

We analyze a consumer-choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. Participants differ in their reported taste for the two sandwiches and in their degree of loss aversion, which we measure separately. We find that more-loss-averse participants are more likely to opt for the cheaper sandwich, in line with theoretical predictions. The estimates in the model with rational expectations are slightly more significant than those with naïve expectations. (JEL D11, D12, D84, M31)

scholarly journals Loss Aversion and Consumption Plans with Stochastic Reference Points

2016 ◽  
Vol 16 (1) ◽  
pp. 303-336 ◽  
Author(s):  
Hyeon Park
Keyword(s):  
Decision Maker ◽  
Loss Aversion ◽  
Intertemporal Choice ◽  
Choice Model ◽  
State Dependence ◽  
Analytic Solutions ◽  
The State ◽  
Reference Points ◽  
State Dependent ◽  
The Individual

AbstractThis paper studies the making of risky choices following loss aversion with endogenous reference expectations under the two schemes of state-independent and state-dependent stochastic reference points. Using a tractable, intertemporal choice model, this paper derives analytic solutions to show that, when loss aversion is high, the reference-dependent decision maker saves a markedly larger amount than is predicted by the standard model. When the loss aversion is low (i.e. the individual is loss-tolerant), the overall result is ambiguous, although the decision maker may deviate into consuming more; if he faces a small level of uncertainty relative to the intensity of his loss aversion, he may even do this by borrowing. Given the same loss aversion level, this study determines that, in the presence of positive state-dependence, the state-independent model generates greater deviation than the state-dependent one. Finally, this paper derives a two-period general equilibrium result with two agents who have different attitudes toward loss.

scholarly journals Subgame Perfect Equilibrium in the Rubinstein Bargaining Game with Loss Aversion

Complexity ◽  
2019 ◽  
Vol 2019 ◽  
pp. 1-23 ◽  
Author(s):  
Zhongwei Feng ◽  
Chunqiao Tan
Keyword(s):  
Loss Aversion ◽  
Reference Point ◽  
Bargaining Power ◽  
Subgame Perfect Equilibrium ◽  
Reference Points ◽  
Bargaining Game ◽  
The Other ◽  
Nash Bargaining ◽  
Perfect Equilibrium ◽  
High Share

Rubinstein bargaining game is extended to incorporate loss aversion, where the initial reference points are not zero. Under the assumption that the highest rejected proposal of the opponent last periods is regarded as the associated reference point, we investigate the effect of loss aversion and initial reference points on subgame perfect equilibrium. Firstly, a subgame perfect equilibrium is constructed. And its uniqueness is shown. Furthermore, we analyze this equilibrium with respect to initial reference points, loss aversion coefficients, and discount factor. It is shown that one benefits from his opponent’s loss aversion coefficient and his own initial reference point and is hurt by loss aversion coefficient of himself and the opponent’s initial reference point. Moreover, it is found that, for a player who has a higher level of loss aversion than the other, although this player has a higher initial reference point than the opponent, this player can(not) obtain a high share of the pie if the level of loss aversion of this player is sufficiently low (high). Finally, a relation with asymmetric Nash bargaining is established, where player’s bargaining power is negatively related to his own loss aversion and the initial reference point of the other and positively related to loss aversion of the opponent and his own initial reference point.

The Effect of Temporary Changes and Expectations on Individuals' Decisions: Evidence from a Tax Compliance Setting

2019 ◽  
Vol 95 (3) ◽  
pp. 33-58
Author(s):  
Chelsea Rae Austin ◽  
Donna D. Bobek ◽  
Ethan G. LaMothe
Keyword(s):  
Tax Evasion ◽  
Value Function ◽  
Tax Compliance ◽  
Reference Points ◽  
Temporary Change ◽  
Tax Changes

ABSTRACT Based on prospect theory's value function, we predict how reference points adapt to influence individuals' tax evasion choices during and after experiencing temporary tax changes. Results from a multi-round experiment indicate reactions to temporary changes depend jointly on the direction of the change and expectations. Specifically, individuals experiencing a tax increase evade more while the increase is in effect. More interestingly, knowing, versus not knowing, a tax decrease is temporary prevents an increase in evasion after the temporary change expires, and may lead individuals to reduce evasion during the change. In a supplemental condition, we induce uncertainty by repeatedly extending a tax decrease. We find when uncertainty is introduced, both benefits of knowing the temporal nature of the decrease are lost. Overall results are consistent with individuals failing to adapt to a loss state and adapting quickly to a gain state unless they are certain the gain state is temporary.

Behavioral Aspects of Commodity Markets

2018 ◽  
Author(s):  
John R. Nofsinger
Keyword(s):  
Risk Taking ◽  
Loss Aversion ◽  
Futures Markets ◽  
Reference Points ◽  
The Public ◽  
Behavioral Biases ◽  
Market Makers ◽  
Market Participants ◽  
Momentum Investing ◽  
The Impact

Are behavioral biases prevalent in commodities and futures markets? Although retail equity investors display many psychological biases, investors who are more sophisticated exhibit fewer biases. The market makers, traders (locals), speculators, hedgers, and institutions of the commodities and futures markets tend to be professional participants, and thus less prone to behavioral biases. Nevertheless, the fast-paced action of these markets is an environment that fosters behavioral errors. This chapter reviews the literature on the pervasiveness of prospect theory behavior and other biases in these markets. Strong evidence indicates that market participants exhibit loss aversion, the impact of reference points, the disposition effect, and overconfidence. They also engage in positive feedback trading and momentum investing. Lastly, the chapter reviews risk-taking and behavioral biases by the type of market participant, particularly focusing on market makers, floor traders, clearing members, and the public.

scholarly journals Personal bests as reference points

2018 ◽  
Vol 115 (8) ◽  
pp. 1772-1776 ◽  
Author(s):  
Ashton Anderson ◽  
Etan A. Green
Keyword(s):  
Loss Aversion ◽  
Reference Points

Personal bests act as reference points. Examining 133 million chess games, we find that players exert effort to set new personal best ratings and quit once they have done so. Although specific and difficult goals have been shown to inspire greater motivation than vague pronouncements to “do your best,” doing one’s best can be a specific and difficult goal—and, as we show, motivates in a manner predicted by loss aversion.

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