Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93281
Authors: 
Dai, Zhixin
Hogarth, Robin M.
Villeval, Marie Claire
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Paper 7932
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individuals update their beliefs about the probability of being audited, both before and after audits are definitely withdrawn.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systematic audits, they decrease both their beliefs and their contributions almost immediately after audits are withdrawn.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they maintain high beliefs about the probability of being audited and continue cooperating long after audits have been withdrawn.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.
Subjects: 
ambiguity
audits
sanctions
beliefs
cooperation
public goods
experiment
JEL: 
C92
H41
D83
Document Type: 
Working Paper

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