Judicial Error and Cooperation

46 Pages Posted: 2 Dec 2014

See all articles by Thomas Markussen

Thomas Markussen

University of Copenhagen - Department of Economics

Louis Putterman

Brown University - Department of Economics

Jean-Robert Tyran

University of Vienna; University of Copenhagen - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: November 14, 2014

Abstract

Cooperation can be induced by an authority with the power to mete out sanctions for free riders, but law enforcement is prone to error. This paper experimentally analyzes preferences for and consequences of errors in formal sanctions against free riders in a public goods game. With type I errors, even full contributors to the public good may be punished. With type II errors, free riders may go unpunished. We find that judicial error undermines cooperation and that the effects of type I and II errors are symmetric. To investigate their relative (dis-)like for error, we let subjects choose what type of error to prevent. By use of an incentive-compatible mechanism, we find that subjects prefer type II over type I errors. We find that the strength of this preference is fully in line with a motive to maximize income and does not indicate any additional psychological or fairness bias against type I errors.

Keywords: Public goods, sanctions, type I errors, type II errors, willingness to pay

JEL Classification: H41, K4, C92

Suggested Citation

Markussen, Thomas and Putterman, Louis G. and Tyran, Jean-Robert, Judicial Error and Cooperation (November 14, 2014). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 14-27, Available at SSRN: https://ssrn.com/abstract=2532466 or http://dx.doi.org/10.2139/ssrn.2532466

Thomas Markussen

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Louis G. Putterman

Brown University - Department of Economics ( email )

Box B
Providence, RI 02912
United States
401-863-3837 (Phone)
401-863-1970 (Fax)

Jean-Robert Tyran (Contact Author)

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/jean-robert.tyran/

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+45 353 23 027 (Phone)

HOME PAGE: http://www.econ.ku.dk/tyran/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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