In our previous post, we commented on our colleague Alex Raskolnikov’s simple model of legal uncertainty in his excellent paper titled “Probabilistic Compliance” (Yale Journal on Regulation, 2017). To sum up, we loved his probabilistic model of compliance (in our view, it’s one of the best models of legal uncertainty we’ve studied so far, along with Mark Cronshaw and James Alm’s (Public Finance Quarterly, 1995) game-theoretic model of “two-sided uncertainty,” available here, via Research Gate), but we identified two potential blind spots in Raskolnikov’s elegant model. In brief, his model assumes away “detection uncertainty,” and in addition, like all maximization models, it assumes away the social dimension of compliance and evasion behaviors. Accordingly, I will take a different approach, one that emphasizes “probabilistic evasion” and one that models the social dimension of evasion. Specifically, what if law-evading behavior is more like an infectious disease, one that is capable of spreading across a population? (And just as important, what effect could legal uncertainty have on the rate of transmission?) A contagion model is plausible to the extent some (many?, most?) people tend to copy or imitate what other people are doing. Another advantage of a contagion model is that we don’t have to make any demanding common knowledge assumptions, unlike information cascade models that assume each actor is able to observe the choices and decisions made by all other actors. So fasten your seat belts: we will present our contagion model of evasion in our next blog post.
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