Thursday 15 May 2014, 1.00PM to 2.00pm
Speaker(s): Charles Kamtoh
Corruption is understood as a matter of incentives but the rationality of such decision and it implications are still unclear. Our focus will be on the rationale of an agent siding with corruption and what does it means for our understanding of such problem.
Using game theory we build upon a model developed by Macrae (1986) as we present a case of bureaucratic corruption with both side free to choose between corruption and honesty while having their own choice and the choice of their pair affecting the redistribution of the payoffs through its effect on the gain from corruption and the punishment inflicted by the state.
Our game allows us to consider the behaviour of both sides taking part to the game. In addition, aware of the existing equilibrium one could potentially predict the outcome of such game which will be useful to understand the prevalence of corruption around the world.
We find that as long as corruption exist the strategy corrupt-corrupt provide a context in which no player has an incentive to deviate from his/her chosen strategy. In addition, we also found cases where a secondary equilibrium appears in the form of honest-honest. Further, depending on whether one consider our game as a sequential game or a simultaneous game, we can either explain the pervasiveness of corruption or provide the best strategy for any player in the form of a Nash equilibrium in mixed strategy.
At last the existence of two equilibriums lead us to suggest that the fight against corruption could be better achieve through the promotion and reward of honesty rather than the prosecution of corrupt behaviour.
Location: Economics Staff Room (EC/202)
Admission: Economics Thursday Workshop. For Staff and Postgraduate students