Advanced Search
MyIDEAS: Login to save this paper or follow this series

Ambiguity on Audits and Cooperation in a Public Goods Game

Contents:

Author Info

  • Dai, Zhixin

    ()
    (CNRS, GATE)

  • Hogarth, Robin M.

    ()
    (Universitat Pompeu Fabra)

  • Villeval, Marie Claire

    ()
    (CNRS, GATE)

Abstract

We investigate the impact of various audit schemes on the future provision of public goods, when contributing less than the average of the group is sanctioned exogenously 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individuals update their beliefs about the probability of being audited, both before and after audits are definitely withdrawn.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systematic audits, they decrease both their beliefs and their contributions almost immediately after audits are withdrawn.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they maintain high beliefs about the probability of being audited and continue cooperating long after audits have been withdrawn. Inconsistency in experiencing audits across time clearly increases the difficulty of learning the true audit probabilities. Thus, conducting less frequent and irregular audits with higher fines can increase efficiency dramatically.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ftp.iza.org/dp7932.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7932.

as in new window
Length: 51 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:iza:izadps:dp7932

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

Keywords: ambiguity; audits; sanctions; beliefs; cooperation; public goods; experiment;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Maciejovsky, Boris & Kirchler, Erich & Schwarzenberger, Herbert, 2007. "Misperception of chance and loss repair: On the dynamics of tax compliance," Journal of Economic Psychology, Elsevier, Elsevier, vol. 28(6), pages 678-691, December.
  2. Wang, Stephanie W., 2011. "Incentive effects: The case of belief elicitation from individuals in groups," Economics Letters, Elsevier, Elsevier, vol. 111(1), pages 30-33, April.
  3. Olivier Bochet & Talbot Page & Louis Putterman, 2005. "Communication and Punishment in Voluntary Contribution Experiments," Working Papers 2005-09, Brown University, Department of Economics.
  4. Jan Eeckhout & Nicola Persico & Petra E. Todd, 2010. "A Theory of Optimal Random Crackdowns," American Economic Review, American Economic Association, American Economic Association, vol. 100(3), pages 1104-35, June.
  5. Tom Baker & Alon Harel & Tamar Kugler, 2003. "The Virtues of Uncertainty in Law: An Experimental Approach," Discussion Paper Series, The Center for the Study of Rationality, Hebrew University, Jerusalem dp310, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  6. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, American Economic Association, vol. 90(4), pages 980-994, September.
  7. Houser, Daniel & Xiao, Erte & McCabe, Kevin & Smith, Vernon, 2008. "When punishment fails: Research on sanctions, intentions and non-cooperation," Games and Economic Behavior, Elsevier, Elsevier, vol. 62(2), pages 509-532, March.
  8. Francesco Guala & Luigi Mittone, 2005. "Experiments in economics: External validity and the robustness of phenomena," Journal of Economic Methodology, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(4), pages 495-515.
  9. Isaac, R. Mark & McCue, Kenneth F. & Plott, Charles R., . "Public Goods Provision in an Experimental Environment," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 428, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Laurent Denant-Boemont & David Masclet & Charles Noussair, 2007. "Punishment, counterpunishment and sanction enforcement in a social dilemma experiment," Economic Theory, Springer, Springer, vol. 33(1), pages 145-167, October.
  11. Mariana Blanco & Dirk Engelmann & Alexander Koch & Hans-Theo Normann, 2010. "Belief elicitation in experiments: is there a hedging problem?," Experimental Economics, Springer, Springer, vol. 13(4), pages 412-438, December.
  12. Fox, Craig R & Tversky, Amos, 1995. "Ambiguity Aversion and Comparative Ignorance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 585-603, August.
  13. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, Econometric Society, vol. 67(4), pages 827-874, July.
  14. Nikiforakis, Nikos, 2008. "Punishment and counter-punishment in public good games: Can we really govern ourselves," Journal of Public Economics, Elsevier, Elsevier, vol. 92(1-2), pages 91-112, February.
  15. Simon Gaechter & Elke Renner, 2006. "The Effects of (Incentivized) Belief Elicitation in Public Good Experiments," Discussion Papers, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham 2006-16, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  16. Arthur Snow & Ronald S. Warren, 2005. "Ambiguity about Audit Probability, Tax Compliance, and Taxpayer Welfare," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 43(4), pages 865-871, October.
  17. Luigi Mittone, 2002. "Dynamic behaviours in tax evasion. An experimental approach," CEEL Working Papers, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia 0203, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  18. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2001. "Monetary and Non-Monetary Punishment in the Voluntary Contributions Mechanism," Post-Print, HAL halshs-00151423, HAL.
  19. Carpenter, Jeffrey P., 2004. "Punishing Free-Riders: How Group Size Affects Mutual Monitoring and the Provision of Public Goods," IZA Discussion Papers 1337, Institute for the Study of Labor (IZA).
  20. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  21. Jean-Robert Tyran & Lars P. Feld, 2005. "Achieving Compliance when Legal Sanctions are Non-Deterrent," CREMA Working Paper Series, Center for Research in Economics, Management and the Arts (CREMA) 2005-17, Center for Research in Economics, Management and the Arts (CREMA).
  22. I. Gilboa & A. W. Postlewaite & D. Schmeidler., 2009. "Probability and Uncertainty in Economic Modeling," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
  23. Harel, Alon & Segal, Uzi, 1999. "Criminal Law and Behavioral Law and Economics: Observations on the Neglected Role of Uncertainty in Deterring Crime," Berkeley Olin Program in Law & Economics, Working Paper Series, Berkeley Olin Program in Law & Economics qt2gx715nd, Berkeley Olin Program in Law & Economics.
  24. Muehlbacher, Stephan & Mittone, Luigi & Kastlunger, Barbara & Kirchler, Erich, 2012. "Uncertainty resolution in tax experiments: Why waiting for an audit increases compliance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 41(3), pages 289-291.
  25. Ernst Fehr & Bettina Rockenbach, 2003. "Detrimental effects of sanctions on human altruism," Microeconomics, EconWPA 0305007, EconWPA.
  26. Bebchuk, Lucian Arye & Kaplow, Louis, 1992. "Optimal Sanctions When Individuals Are Imperfectly Informed about the Probability of Apprehension," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 21(2), pages 365-70, June.
  27. Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, Elsevier, vol. 37(3), pages 291-304, December.
  28. Alm, James & Jackson, Betty & McKee, Michael, 1992. "Institutional Uncertainty and Taxpayer Compliance," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 1018-26, September.
  29. Josef Falkinger, 2000. "A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 247-264, March.
  30. Falkinger, Josef, 1996. "Efficient private provision of public goods by rewarding deviations from average," Journal of Public Economics, Elsevier, Elsevier, vol. 62(3), pages 413-422, November.
  31. Gregory DeAngelo & Gary Charness, 2012. "Deterrence, expected cost, uncertainty and voting: Experimental evidence," Journal of Risk and Uncertainty, Springer, Springer, vol. 44(1), pages 73-100, February.
  32. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2007. "Probabilities in Economic Modeling," PIER Working Paper Archive 07-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  33. Croson, Rachel T. A., 2000. "Thinking like a game theorist: factors affecting the frequency of equilibrium play," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 41(3), pages 299-314, March.
  34. Arthur Snow & Ronald S. Warren Jr., 2007. "Audit Uncertainty, Bayesian Updating, and Tax Evasion," Public Finance Review, , , vol. 35(5), pages 555-571, September.
  35. Kastlunger, Barbara & Kirchler, Erich & Mittone, Luigi & Pitters, Julia, 2009. "Sequences of audits, tax compliance, and taxpaying strategies," Journal of Economic Psychology, Elsevier, Elsevier, vol. 30(3), pages 405-418, June.
  36. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  37. Andrew Caplin & Mark Dean, 2007. "The Neuroeconomic Theory of Learning," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 148-152, May.
  38. Roth, Alvin & Bereby-Meyer, Yoella, 2006. "The Speed of Learning in Noisy Games: Partial Reinforcement and the Sustainability of Cooperation," Scholarly Articles 2580381, Harvard University Department of Economics.
  39. Yaw Nyarko & Andrew Schotter, 2002. "An Experimental Study of Belief Learning Using Elicited Beliefs," Econometrica, Econometric Society, Econometric Society, vol. 70(3), pages 971-1005, May.
  40. Spicer, Michael W. & Thomas, J. Everett, 1982. "Audit probabilities and the tax evasion decision: An experimental approach," Journal of Economic Psychology, Elsevier, Elsevier, vol. 2(3), pages 241-245, September.
  41. Snow, Arthur & Warren, Ronald Jr., 2005. "Tax evasion under random audits with uncertain detection," Economics Letters, Elsevier, Elsevier, vol. 88(1), pages 97-100, July.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Ambiguity on Audits and Cooperation in a Public Goods Game
    by Alessandro Cerboni in Knowledge Team on 2014-02-28 15:53:38

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7932. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.