Deterrence through Word of Mouth
37 Pages Posted: 23 Feb 2009
There are 2 versions of this paper
Deterrence through Word of Mouth
Deterrence through Word of Mouth
Date Written: February 2009
Abstract
The deterrent effect of law enforcement rests on the link between the actual and the perceived detection risk. We study the role of word of mouth for this linkage. Our approach makes use of micro data on compliance with TV license fees allowing us to distinguish between households who have been subject to enforcement and those who have not. Exploiting local variation in field inspectors' efforts induced by snowfall, we find a striking response of households to increased enforcement in their vicinity, with compliance rising significantly among those who had no interaction with inspectors. As we can exclude other channels of information transmission, our finding establishes a substantial deterrent effect mediated by word of mouth.
Keywords: deterrence, law enforcement, word of mouth
JEL Classification: K42, D83
Suggested Citation: Suggested Citation
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