IDEAS home Printed from https://ideas.repec.org/p/inn/wpaper/2009-01.html
   My bibliography  Save this paper

Public beliefs and corruption in a repeated psychological game

Author

Listed:
  • Loukas Balafoutas

Abstract

This paper investigates the role of guilt aversion for corruption in public administration. Corruption is modeled as the outcome of a game played between a bureaucrat, a lobby, and the public. There is a moral cost of corruption for the bureaucrat, who is averse to letting the public down. We study how the behavior of the lobby and the bureaucrat depend on perceived public beliefs, when these are constant and when they are allowed to vary over time. With time-varying beliefs, corruption is more likely when the horizon of the game is relatively long and when public beliefs are initially low and are updated fast.

Suggested Citation

  • Loukas Balafoutas, 2009. "Public beliefs and corruption in a repeated psychological game," Working Papers 2009-01, Faculty of Economics and Statistics, Universität Innsbruck.
  • Handle: RePEc:inn:wpaper:2009-01
    as

    Download full text from publisher

    File URL: https://www2.uibk.ac.at/downloads/c4041030/wpaper/2009-01.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-159, January.
    3. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    4. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
    5. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    6. Miguel A. Costa-Gomes & Georg Weizsäcker, 2008. "Stated Beliefs and Play in Normal-Form Games," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 729-762.
    7. Christopher J. Waller & Thierry Verdier & Roy Gardner, 2002. "Corruption: Top Down or Bottom Up?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 688-703, October.
    8. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(1), pages 1-22.
    9. Gueth, W. & van Damme, E.E.C., 1994. "Information, strategic behavior and fairness in ultimatum bargaining : An experimental study," Other publications TiSEM 84951aae-31ab-46fc-85f5-3, Tilburg University, School of Economics and Management.
    10. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    11. Klaus Abbink & Bernd Irlenbusch & Elke Renner, 2002. "An Experimental Bribery Game," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(2), pages 428-454, October.
    12. Battigalli, Pierpaolo & Dufwenberg, Martin, 2009. "Dynamic psychological games," Journal of Economic Theory, Elsevier, vol. 144(1), pages 1-35, January.
    13. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
    14. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine.
    15. Marjit, Sugata & Shi, Heling, 1998. "On controlling crime with corrupt officials," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 163-172, January.
    16. Huang, Peter H & Wu, Ho-Mou, 1994. "More Order without More Law: A Theory of Social Norms and Organizational Cultures," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(2), pages 390-406, October.
    17. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    18. van Damme, E.E.C. & Dufwenberg, M. & Gneezy, U. & Güth, W., 2000. "An Experimental Test of Direct and Indirect Reciprocity in Case of Complete and Incomplete Information," Other publications TiSEM dd58eedd-ce16-44e7-8f5a-1, Tilburg University, School of Economics and Management.
    19. Abbink, Klaus & Irlenbusch, Bernd & Renner, Elke, 2000. "The moonlighting game: An experimental study on reciprocity and retribution," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 265-277, June.
    20. Reuben, Ernesto & Sapienza, Paola & Zingales, Luigi, 2009. "Is mistrust self-fulfilling?," Economics Letters, Elsevier, vol. 104(2), pages 89-91, August.
    21. Martin Dufwenberg & Simon Gaechter & Heike Hennig-Schmidt, 2006. "The Framing of Games and the Psychology of Strategic Choice," Discussion Papers 2006-20, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    22. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    23. Falk, Armin & Fehr, Ernst & Fischbacher, Urs, 2008. "Testing theories of fairness--Intentions matter," Games and Economic Behavior, Elsevier, vol. 62(1), pages 287-303, January.
    24. Thierry Verdier & Daron Acemoglu, 2000. "The Choice between Market Failures and Corruption," American Economic Review, American Economic Association, vol. 90(1), pages 194-211, March.
    25. Richard Zeckhauser (ed.), 1991. "Strategy and Choice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262240335, December.
    26. Colin F. Camerer, 1997. "Progress in Behavioral Game Theory," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 167-188, Fall.
    27. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
    28. Dufwenberg, Martin & Gneezy, Uri, 2000. "Measuring Beliefs in an Experimental Lost Wallet Game," Games and Economic Behavior, Elsevier, vol. 30(2), pages 163-182, February.
    29. Frans van Winden, 2007. "Affective Public Choice," Chapters, in: José Casas Pardo & Pedro Schwartz (ed.), Public Choice and the Challenges of Democracy, chapter 3, Edward Elgar Publishing.
    30. Charness, Gary & Rabin, Matthew, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt3d04q5sm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    31. Binmore, Ken & Shaked, Avner, 2010. "Experimental Economics: Where Next? Rejoinder," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 120-121, January.
    32. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 817-869.
    33. Luca Corazzini, Sebastian Kube, Michel André Maréchal, 2007. "Towards a Behavioral Public Choice: Guilt-Aversion and Accountability in the Lab," ISLA Working Papers 27, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy.
    34. Binmore, Ken & Shaked, Avner, 2010. "Experimental economics: Where next?," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 87-100, January.
    35. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
    36. John Kagel & Katherine Wolfe, 2001. "Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game," Experimental Economics, Springer;Economic Science Association, vol. 4(3), pages 203-219, December.
    37. Gary Charness & Peter Kuhn, 2007. "Does Pay Inequality Affect Worker Effort? Experimental Evidence," Journal of Labor Economics, University of Chicago Press, vol. 25(4), pages 693-723.
    38. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    39. José Casas Pardo & Pedro Schwartz (ed.), 2007. "Public Choice and the Challenges of Democracy," Books, Edward Elgar Publishing, number 12578.
    40. Guerra, Gerardo & John Zizzo, Daniel, 2004. "Trust responsiveness and beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 25-30, September.
    41. Dufwenberg, Martin, 2002. "Marital investments, time consistency and emotions," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 57-69, May.
    42. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May.
    43. Michael Bacharach & Gerardo Guerra & Daniel Zizzo, 2007. "The Self-Fulfilling Property of Trust: An Experimental Study," Theory and Decision, Springer, vol. 63(4), pages 349-388, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Attanasi, Giuseppe & Rimbaud, Claire & Villeval, Marie Claire, 2019. "Embezzlement and guilt aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 409-429.
    2. John Bennett & Matthew D. Rablen, 2021. "Bribery, hold‐up, and bureaucratic structure," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 880-903, July.
    3. Ye-Feng Chen & Shu-Guang Jiang & Marie Claire Villeval, 2015. "The Tragedy of Corruption. Corruption as a social dilemma," Working Papers 1531, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    4. Chen, Yefeng & Jiang, Shuguang & Villeval, Marie Claire, 2016. "The Tragedy of Corruption," IZA Discussion Papers 10175, Institute of Labor Economics (IZA).
    5. Yang Hu & Chen Hu & Edmund Derrington & Brice Corgnet & Chen Qu & Jean-Claude Dreher, 2021. "Neural basis of corruption in power-holders," Post-Print hal-03193724, HAL.
    6. Attanasi, Giuseppe & Battigalli, Pierpaolo & Manzoni, Elena & Nagel, Rosemarie, 2019. "Belief-dependent preferences and reputation: Experimental analysis of a repeated trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 341-360.
    7. Pierpaolo Battigalli & Martin Dufwenberg, 2019. "Psychological Game Theory," Working Papers 646, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    8. Pierpaolo Battigalli & Martin Dufwenberg, 2022. "Belief-Dependent Motivations and Psychological Game Theory," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 833-882, September.
    9. Loukas Balafoutas & Helena Fornwagner, 2017. "The limits of guilt," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(2), pages 137-148, December.
    10. Jandhyala, Srividya & Oliveira, Fernando S., 2021. "The role of international anti-corruption regulations in promoting socially responsible practices," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 15-32.
    11. Giuseppe Attanasi & Claire Rimbaud & Marie-Claire Villeval, 2020. "Guilt Aversion in (New) Games: the Role of Vulnerability," GREDEG Working Papers 2020-15, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    12. Daniel Gingerich & Virginia Oliveros & Ana Corbacho & Mauricio Ruiz-Vega, 2015. "Corruption as a Self-Fulfilling Prophecy: Evidence from a Survey Experiment in Costa Rica," IDB Publications (Working Papers) 88334, Inter-American Development Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dhaene, Geert & Bouckaert, Jan, 2010. "Sequential reciprocity in two-player, two-stage games: An experimental analysis," Games and Economic Behavior, Elsevier, vol. 70(2), pages 289-303, November.
    2. Eric Cardella, 2016. "Exploiting the guilt aversion of others: do agents do it and is it effective?," Theory and Decision, Springer, vol. 80(4), pages 523-560, April.
    3. Charness, Gary & Naef, Michael & Sontuoso, Alessandro, 2019. "Opportunistic conformism," Journal of Economic Theory, Elsevier, vol. 180(C), pages 100-134.
    4. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    5. Charness, Gary B & Dufwenberg, Martin, 2006. "Promises & Partnership," University of California at Santa Barbara, Economics Working Paper Series qt0127h86v, Department of Economics, UC Santa Barbara.
    6. Khalmetski, Kiryl, 2016. "Testing guilt aversion with an exogenous shift in beliefs," Games and Economic Behavior, Elsevier, vol. 97(C), pages 110-119.
    7. Sarkar, Sumit, 2019. "Gratitude, conscience, and reciprocity: Models of supplier motivation when quality is non-contractible," European Journal of Operational Research, Elsevier, vol. 277(2), pages 633-642.
    8. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    9. Attanasi, Giuseppe & Rimbaud, Claire & Villeval, Marie Claire, 2019. "Embezzlement and guilt aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 409-429.
    10. Attanasi, Giuseppe & Rimbaud, Claire & Villeval, Marie Claire, 2023. "Guilt aversion in (new) games: Does partners' payoff vulnerability matter?," Games and Economic Behavior, Elsevier, vol. 142(C), pages 690-717.
    11. Peeters, Ronald & Vorsatz, Marc, 2021. "Simple guilt and cooperation," Journal of Economic Psychology, Elsevier, vol. 82(C).
    12. Pierpaolo Battigalli & Martin Dufwenberg, 2022. "Belief-Dependent Motivations and Psychological Game Theory," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 833-882, September.
    13. Fehr, Ernst & Schmidt, Klaus M., 2005. "The Economics of Fairness, Reciprocity and Altruism – Experimental Evidence and New Theories," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 66, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    14. Riccardo Ghidoni & Matteo Ploner, 2014. "When do the Expectations of Others Matter? An Experiment on Distributional Justice and Guilt Aversion," CEEL Working Papers 1403, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    15. Bierbrauer, Felix & Netzer, Nick, 2016. "Mechanism design and intentions," Journal of Economic Theory, Elsevier, vol. 163(C), pages 557-603.
    16. Reuben, Ernesto & van Winden, Frans, 2008. "Social ties and coordination on negative reciprocity: The role of affect," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 34-53, February.
    17. Pikulina, Elena S. & Tergiman, Chloe, 2020. "Preferences for power," Journal of Public Economics, Elsevier, vol. 185(C).
    18. Roman Inderst & Kiryl Khalmetski & Axel Ockenfels, 2019. "Sharing Guilt: How Better Access to Information May Backfire," Management Science, INFORMS, vol. 65(7), pages 3322-3336, July.
    19. Yang, Yang & Onderstal, Sander & Schram, Arthur, 2016. "Inequity aversion revisited," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 1-16.
    20. Giuseppe Attanasi & Pierpaolo Battigalli & Elena Manzoni & Rosemarie Nagel, 2013. "Disclosure of Belief-Dependent Preferences in a Trust Game," Working Papers 506, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

    More about this item

    Keywords

    psychological games; corruption; bureaucracy; guilt; third party;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inn:wpaper:2009-01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Janette Walde (email available below). General contact details of provider: https://edirc.repec.org/data/fuibkat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.