Each participant in this experiment chooses whether or not to extract money from
a row of boxes, each containing a specified money amount. The money is taken from a
common pool in the sense that each person's share of a group return is reduced by
extraction activities of all members of the group (including themselves). There is
an externality in the sense that private individual gains (if undectected) exceed the lost
share of the group return. An individual who extracts more money by marking more boxes, however,
faces a higher chance of being dectected and penalized by an auditor. There can be "safety in numbers"
in the sense that the auditor's resources are limited, and detection is less likely in
the presence of high extraction rates by members of the group. Penalties are specified in
the experiment setup, and one option is to have extraction opportunities in a subsequent round
depend on whether or not an individual was detected extracting money in the prior round.
| | | | | | The experiment higlights the dynamic effects of policies designed to mitigate
corruption in common pool settings. |
Vecon Lab - April 26, 2024 |