Ambiguity on Audits and Cooperation in a Public Goods Game

Abstract

Abstract:We investigate the impact of various audit schemes on the provision of public goods, when contributing less than the average of the other group members is centrally sanctioned and the probability of an audit is unknown. We study how individuals update their beliefs about the probability of being audited, both before and after audits are definitely withdrawn. We find that when individuals have initially experienced systematic audits, they decrease both their beliefs and their contributions almost immediately after audits are withdrawn. In contrast, when audits were initially less frequent and more irregular, they maintain high beliefs and continue cooperating long after audits have been withdrawn. This identifies the compliance effect of irregularity and uncertainty due to learning difficulties. By increasing both the frequency of audits and the severity of sanctions, we also identify an educative effect of frequent and high sanctions on further cooperation.

The Efficiency of Crackdowns: A Lab-In-The-Field Experiment in Public Transportations

“…Empirical studies, such as Kastlunger et al (2009), Di Schargrodsky (2003, 2004), Dai et al (2015c), Banuri and Eckel (2015) offer mixed evidence on the effectiveness and efficiency of crackdowns. Moreover, they do not investigate the relative efficiency and effectiveness of crackdowns to alternative mechanisms of crime prevention such as non-concentrated random controls keeping everything else constant.…”

“…These studies either did not explicitly compare the efficiency and effectiveness of a crackdown policy to an alternative mechanism of crime prevention such as random controls Schargrodsky, 2003, 2004;Banuri and Eckel, 2015) or they vary at the same time other things than just the concentration of controls (Dai et al, 2015c;Kastlunger et al, 2009). For instance, Dai et al (2015c) also vary the total number of audits, while Kastlunger et al (2009) indirectly change subjects' expectation of an audit by informing them in advance of the overall probability of being audit.! 2 The cost of using a public vehicle is, in general, quite small (the price of a ticket is € 1.70 in the city where this study was conducted).…”

“…the decrease of compliance after an audit is caused more by misperception of chance than by the willingness to repair a loss. In contrast, Dai et al (2015c) investigate compliance under ambiguity when subjects ignore not only the distribution of audits over time but also the overall probability of audits. Their vehicle of research is a public good game with a centralized mechanism of punishment that sanctions, with a certain probability, subjects who contributed less than the average group contribution.…”