Show how multiple equilibria can occur

Reference no: EM131204046

Assume that 10 percent of the population will always evade paying taxes no matter what anyone else does. Equally 10 percent of the population will never evade paying taxes. The remaining 80 percent are more likely to evade when the proportion evading increases. Prove that there will be at least one equilibrium level of tax evasion. Show how multiple equilibria can occur. Which equilibria are stable?

Reference no: EM131204046

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