Economic Analysis of Late Payment Fines Remission of Driving in Iran, Game Theory Approach

One of the most important tools to reduce traffic violations and consequently the number of accidents in the country is to penalize the offenders. In Iran, double penalty is approved for delaying in payment of a fine, but it is possible that a significant number of offenders would not pay their fines in addition to late payment fines. Hence, in this study, the interactions between traffic police (or Rahvar NAJA) and driver in fines and their remission were examined by game theory and the backward induction Nash equilibrium of the dynamic game with complete information between two mentioned players was extracted. The results of the Nash equilibrium of the game showed that if the penalty remission is repeated again, then the irregular driver (the driver who don`t pay the fine within the deadline) will try to not paying the fine within the deadline; this means that the mentioned fines are not efficient. Also, this mention system of penalties makes regular drivers (drivers who pay fines in due time) to not pay fines for driving violations within the deadline; in other words, the designed system of fine and remission will change the regular driver in to an irregular driver. In this regard, the traffic police (Rahvar NAJA) are suggested that in order to achieve their goals, they should receive the non-payment fine within the deadline without remission or instead of the mentioned fine for irregular drivers, they can use a system of penalties which uses to reward the regular drivers.