Good-Citizen Lottery

Duk Gyoo Kim

No 2025rwp-239, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: This paper examines the Good-Citizen Lottery, a budget-balanced institutional mechanism designed to collectively minimize public bads by using penalties from violators to fund a reward for one randomly-selected prosocial agent. Contrary to standard voluntary contribution models where cooperation decays in large groups, our game-theoretic model predicts the asymptotic stability of good-citizen behavior. This is driven by the budget-neutral nature of the lottery: as the group size grows, the decreased probability of winning the lottery is offset by the endogenously increasing prize pool (funded by more violators). Experimental evidence is consistent with this theoretical prediction: the proportion of good behavior is robust and weakly increases with group size. Finally, we show that this institutional success is further enhanced by a behavioral channel: individuals who subjectively overestimate small winning probabilities find the uncertain reward relatively more appealing, sustaining compliance levels above the risk-neutral benchmark.

Keywords: Lottery; Public bads; Imperfect monitoring; Laboratory experiments (search for similar items in EconPapers)
JEL-codes: C91 D73 H41 K42 (search for similar items in EconPapers)
Pages: 29pages
Date: 2025-03
New Economics Papers: this item is included in nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:yon:wpaper:2025rwp-239

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