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Ambiguity on Audits and Cooperation in a Public Goods Game

Author

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  • 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individuals update their beliefs about the probability of being audited, both before and after audits are definitely withdrawn.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systematic audits, they decrease both their beliefs and their contributions almost immediately after audits are withdrawn.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they maintain high beliefs about the probability of being audited and continue cooperating long after audits have been withdrawn.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.

Suggested Citation

  • Dai, Zhixin & Hogarth, Robin M. & Villeval, Marie Claire, 2014. "Ambiguity on Audits and Cooperation in a Public Goods Game," IZA Discussion Papers 7932, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7932
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    1. Ambiguity on Audits and Cooperation in a Public Goods Game
      by Alessandro Cerboni in Knowledge Team on 2014-02-28 21:53:38

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    Cited by:

    1. Zhixin Dai & Fabio Galeotti & Marie Claire Villeval, 2016. "Cheating in the Lab Predicts Fraud in the Field An Experiment in Public Transportations," Working Papers halshs-01265696, HAL.
    2. Zhixin Dai & Fabio Galeotti & Marie Claire Villeval, 2017. "The efficiency of crackdowns: a lab-in-the-field experiment in public transportations," Theory and Decision, Springer, vol. 82(2), pages 249-271, February.
    3. Daniel A. DeCaro & Marco A. Janssen & Allen Lee, 2015. "Synergistic effects of voting and enforcement on internalized motivation to cooperate in a resource dilemma," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 10(6), pages 511-537, November.

    More about this item

    Keywords

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

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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