The Impact of Audit Rate and Participant Pay Structure on Decision Making in Experimental Research

• In Event: Taxpayer Decision Making in Light of Tax Authority Choices and Emotions

Abstract

Researchers often make careful and intentional experimental design choices about items other than just independent variables. However, these non-focal design choices may also have an impact on participant decision-making. First, we conduct a comprehensive review of design choices made in tax experiments published over the last 31 years. Then, we investigate whether and how the experimental design choices of (1) audit rate and (2) participant pay structure influence decision making in an experimental research setting. We utilize a 5 (audit rate: unstated, stated at 10 percent, stated at 30 percent, stated at 40 percent, or stated at 55 percent) by 2 (pay structure: flat or incentive) experimental design. Based on expected utility theory, we predict and find that taxpayer compliance is higher under a stated experimental audit rate (as opposed to an unstated audit rate), increases as the experimental audit rate increases, and is higher under a flat pay structure (compared to an incentive-based pay structure). This study has important implications for behavioral researchers when making experimental design choices.

Authors

• Amy M Hageman, Kansas State University

• Jason M Schwebke, Texas Tech University

• Ashley Nicole West, Kansas State University