How peer monitoring and punishment affect the performance of the group contract

Purpose: The purpose of this paper is to investigate the impact of three types of peer monitoring and punishment tools on the performance of a group contract for the control of agricultural non-point source pollution (ANPSP) in China. Design/methodology/approach: Experimental economics. Findings: All the three tools result in efficiency improvement and show little difference in performance. In addition, they break the theoretical Nash equilibrium of the team entry auction and help to better reveal bidders’ private cost information. Originality/value: To the authors’ knowledge, this study can be the first laboratory experiment study in the area of ANPSP in China and might provide some beneficial lessons for China’s policy-makers.