Abstract
Limited government capacity frequently results in multiple equilibria. If most agents comply with government policy, then limited enforcement is sufficient to dissuade any given agent from misbehaving. If most agents do not comply, then limited enforcement capacity has a negligible impact on incentives. We study the extent to which properly designed enforcement priorities can help select a high compliance equilibrium. Our analysis emphasizes the impact of design features such as discounts and information provision both in theory, and in experimental play. While large discounts and information provision have a negligible impact on collection in theory, our experiment tests whether these results are borne out in practice. We find support for the prediction that enforcement priorities induce higher compliance, but also find deviations from the prediction that information provision has negligible impacts on collection.
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