Ambiguity on Audits and Cooperation in a Public Goods Game

Zhixin Dai, Robin Hogarth () and Marie Claire Villeval

No 7932, IZA Discussion Papers from Institute of Labor Economics (IZA)

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individuals update their beliefs about the probability of being audited, both before and after audits are definitely withdrawn.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systematic audits, they decrease both their beliefs and their contributions almost immediately after audits are withdrawn.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they maintain high beliefs about the probability of being audited and continue cooperating long after audits have been withdrawn.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

Keywords: audits; sanctions; beliefs; cooperation; public goods; ambiguity; experiment (search for similar items in EconPapers)
JEL-codes: C92 D83 H41 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2014-01
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-exp, nep-pub and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - revised version published in: European Economic Review, 2015, 74, 146-162

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Related works:
Journal Article: Ambiguity on audits and cooperation in a public goods game (2015)
Working Paper: Ambiguity on audits and cooperation in a public goods game (2015)
Working Paper: Ambiguity on audits and cooperation in a public goods game (2014)
Working Paper: Ambiguity on audits and cooperation in a public goods game (2014)
Working Paper: Ambiguity on audits and cooperation in a public goods game (2014)
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