Penalties and Learning in an Auditing Game: An Experimental Investigation
Posted: 9 May 1997
Date Written: February 1997
In this paper we report the results of an experiment designed to compare learning dynamics in an auditing game under four different legal regimes. The central focus of this study is on the effects that financial penalties have on subjects decision-making. Although the role of financial penalties is critical in influencing the actions of agents in legal regimes, prior experimental research has not investigated the extent to which penalties have the intended influence on agents. Our results indicate that the traditional learning model does not apply to the learning of legal regimes unless penalties are explicitly introduced to the learning model.
JEL Classification: M40, M49, C91
Suggested Citation: Suggested Citation