Peers or police?: The effect of choice and type of monitoring in the provision of public goods

Punishments are meant to deter bad acts, but we commonly only punish those we catch. At some point in time, a society chooses how to catch bad acts. We explore the effect of how we catch bad acts on public good provision. We contrast monitoring done by peers (e.g., a neighbor reporting illegal dumping) to that done by an organized group (e.g., the police patrolling for crime). We find that when either type of monitoring is exogenously imposed, both peer and group monitoring lead to similar levels of public good provision. However, when monitoring is an endogenous choice, societies fail to implement group monitoring, resulting in a 44% drop in public good provision. In contrast, peer monitoring results in similar levels of public good provision when either endogenously chosen or exogenously imposed. If the willingness to monitor is unknown, it may be safer to use peer rather than group monitoring.