Title

Making the Most of Limited Government Capacity: Theory and Experiment

Author(s)

Sylvain Chassang Sylvain Chassang (Princeton University and NBER)

Lucia Del Carpio Lucia Del Carpio (INSEAD)

Samuel Kapon Samuel Kapon (New York University)

Abstract

Limits on a government’s capacity to enforce laws can result in multiple equilibria. If most agents comply, limited enforcement is sufficient to dissuade isolated agents from misbehaving. If most agents do not comply, overstretched enforcement capacity has a minimal impact on behavior. We study the extent to which divide-and-conquer enforcement strategies can help select a high compliance equilibrium in the presence of realistic compliance frictions. We study the role of information about the compliance of others both in theory and in lab experiments. As the number of agents gets large, theory indicates that providing information or not is irrelevant in equilibrium. In contrast, providing individualized information has a first order impact in experimental play by increasing convergence to equilibrium.This illustrates the value of out-of-equilibrium information design.

Creation Date

2020-10

Section URL ID

Paper Number

278

URL

https://gceps.princeton.edu/wp-content/uploads/2021/07/278_Chassang.pdf

File Function

Jel

C72, C73, C92, D73, D82, D86, H26

Keyword(s)

Suppress

false

Series

3