Government Positions for Sale - A Model of Grand Corruption

2012 ◽  
Vol 14 (2) ◽  
pp. 1-25 ◽  
Author(s):  
Hans J. Czap ◽  
Kanybek D. Nur-tegin
Keyword(s):  
Developing Countries ◽  
Subgame Perfect Equilibrium ◽  
Backward Induction ◽  
Perfect Equilibrium ◽  
Two Stage ◽  
Stage Game ◽  
The Given

This paper develops a model for a particular type of grand corruption often encountered in developing countries, namely, the sale of government positions by autocratic rulers. A two-stage game is considered, where the autocrat moves first to maximize his revenue from the sale of positions in the cabinet by choosing a price that must be paid by interested politicians. The latter become bureaucrats who maximize their utility from bribe revenues for the given price set by the president. Backward induction yields subgame-perfect equilibrium levels of corruption of the president and bureaucrats. A key insight from this analysis is that conventional tools of fighting corruption become ineffective when corruption at the very top is ignored. The model is distinctive in its treatment of individual moral costs of being corrupt and in its consideration of a revolutionary constraint on the autocrat's choices.

Quantifying Commitment in Nash Equilibria

2019 ◽  
Vol 21 (02) ◽  
pp. 1940011
Author(s):  
Thomas A. Weber
Keyword(s):  
Nash Equilibrium ◽  
Normal Form ◽  
Nash Equilibria ◽  
Dynamic Game ◽  
Subgame Perfect Equilibrium ◽  
Canonical Extension ◽  
Perfect Equilibrium ◽  
Form Game ◽  
Normal Form Game ◽  
The Given

To quantify a player’s commitment in a given Nash equilibrium of a finite dynamic game, we map the corresponding normal-form game to a “canonical extension,” which allows each player to adjust his or her move with a certain probability. The commitment measure relates to the average overall adjustment probabilities for which the given Nash equilibrium can be implemented as a subgame-perfect equilibrium in the canonical extension.

scholarly journals BACKWARD INDUCTION: MERITS AND FLAWS

2017 ◽  
Vol 50 (1) ◽  
pp. 9-24
Author(s):  
Marek M. Kamiński
Keyword(s):  
Infinite Number ◽  
Nash Equilibria ◽  
Complex Structure ◽  
Subgame Perfect Equilibrium ◽  
Perfect Information ◽  
Backward Induction ◽  
Perfect Equilibrium ◽  
Sequential Games ◽  
Theoretical Predictions

Abstract Backward induction (BI) was one of the earliest methods developed for solving finite sequential games with perfect information. It proved to be especially useful in the context of Tom Schelling’s ideas of credible versus incredible threats. BI can be also extended to solve complex games that include an infinite number of actions or an infinite number of periods. However, some more complex empirical or experimental predictions remain dramatically at odds with theoretical predictions obtained by BI. The primary example of such a troublesome game is Centipede. The problems appear in other long games with sufficiently complex structure. BI also shares the problems of subgame perfect equilibrium and fails to eliminate certain unreasonable Nash equilibria.

The Global Economy and the Erosion of Civil Rights: The Case of the Philippines

2006 ◽  
Vol 27 (1) ◽  
pp. 61-88
Author(s):  
Christopher Skene
Keyword(s):  
Developing Countries ◽  
Civil Rights ◽  
Global Economy ◽  
The Philippines ◽  
Two Stage ◽  
External Pressures ◽  
Stage Game ◽  
The Government ◽  
Domestic Interests

Today, democracy is widely accepted, almost religiously so, as the best possible form of governance. Yet, despite these widely held beliefs, it is becoming apparent that in an increasing number of instances democratic governments in developing countries have overridden some of the very rights that they are obliged to protect in manners not unlike their authoritarian predecessors. There is now growing awareness of the fact that democratically elected governments in developing countries are often guilty of violating the rights of their people. What is not as well understood is how external pressures can lead to some of these abuses. Using the Philippines as a case study, this paper illustrates how external pressures indeed can lead to situations in which a government condones the violations of certain rights. This occurs when the government is in the middle of a two stage game in which external interests and domestic interests are at odds with each other and the government is in a position in which it must favour the external interests over the domestic.

scholarly journals Conditional loyalty and its implications for pricing

2021 ◽  
Vol 1 (10) ◽  
Author(s):  
Massimo A. De Francesco
Keyword(s):  
Market Power ◽  
Imperfect Information ◽  
Subgame Perfect Equilibrium ◽  
Price Setting ◽  
Perfect Equilibrium ◽  
Two Stage ◽  
Uniform Price

AbstractBertrand–Edgeworth competition has recently been analyzed under imperfect buyer mobility, as a game in which, once prices are chosen, a static buyer subgame (BS) is played where the buyers choose which seller to visit (see, e.g., Burdett et al. in J Political Econ 109:1060–1085, 2001). Our paper considers a symmetric duopoly where two buyers play a two-stage BS of imperfect information after price setting. An “assessment equilibrium” of the BS is shown to exist in which, with prices at the two firms sufficiently close to each other, the buyers keep loyal if previously served. Conditional loyalty is proved to increase the duopolists’ market power: at the corresponding subgame perfect equilibrium of the entire game, the uniform price is higher than that corresponding to the equilibrium of the BS in which the buyers are persistently randomizing.

scholarly journals On gamesmen and fair men: explaining fairness in non-cooperative bargaining games

2018 ◽  
Vol 5 (2) ◽  
pp. 171709 ◽  
Author(s):  
Ramzi Suleiman
Keyword(s):  
Ultimatum Game ◽  
Golden Ratio ◽  
Subgame Perfect Equilibrium ◽  
Backward Induction ◽  
Perfect Equilibrium ◽  
Bargaining Games ◽  
Discount Factors ◽  
Proposed Model ◽  
Resource Dilemma ◽  
Alternating Offers

Experiments on bargaining games have repeatedly shown that subjects fail to use backward induction, and that they only rarely make demands in accordance with the subgame perfect equilibrium. In a recent paper, we proposed an alternative model, termed ‘economic harmony’ in which we modified the individual's utility by defining it as a function of the ratio between the actual and aspired pay-offs. We also abandoned the notion of equilibrium, in favour of a new notion of ‘harmony’, defined as the intersection of strategies, at which all players are equally satisfied. We showed that the proposed model yields excellent predictions of offers in the ultimatum game, and requests in the sequential common pool resource dilemma game. Strikingly, the predicted demand in the ultimatum game is equal to the famous Golden Ratio (approx. 0.62 of the entire pie). The same prediction was recently derived independently by Schuster (Schuster 2017. Sci. Rep. 7 , 5642). In this paper, we extend the solution to bargaining games with alternating offers. We show that the derived solution predicts the opening demands reported in several experiments, on games with equal and unequal discount factors and game horizons. Our solution also predicts several unexplained findings, including the puzzling ‘disadvantageous counter-offers’, and the insensitivity of opening demands to variations in the players' discount factors, and game horizon. Strikingly, we find that the predicted opening demand in the alternating offers game is also equal to the Golden Ratio.

scholarly journals Computing Nash Equilibria of Unbounded Games

10.29007/1wpl ◽  
2018 ◽  
Author(s):  
Martin Escardo ◽  
Paulo Oliva
Keyword(s):  
Nash Equilibria ◽  
Proof Theory ◽  
A Priori ◽  
Subgame Perfect Equilibrium ◽  
Backward Induction ◽  
Closed Formula ◽  
Perfect Equilibrium ◽  
Finite Games ◽  
Game Theoretic ◽  
Theoretic Technique

Using techniques from higher-type computability theory and proof theory we extend the well-known game-theoretic technique of backward induction to finite games of unbounded length. The main application is a closed formula for calculating strategy profiles in Nash equilibrium and subgame perfect equilibrium even in the case of games where the length of play is not a-priori fixed.

scholarly journals Duopoly price competition with limited capacity

2021 ◽  
Author(s):  
A. Bërdëllima
Keyword(s):  
Price Competition ◽  
Small Firms ◽  
Common Knowledge ◽  
Limited Capacity ◽  
Equilibrium Outcome ◽  
Second Stage ◽  
Duopoly Model ◽  
Full Capacity ◽  
Stage Game ◽  
The Given

AbstractWe study a variation of the duopoly model by Kreps and Scheinkman (1983). Firms limited by their capacity of production engage in a two stage game. In the first stage they commit to levels of production not exceeding their capacities which are then made common knowledge. In the second stage after production has taken place firms simultane- ously compete in prices. Solution of this sequential game shows that the unique Cournot equilibrium outcome as in Kreps and Scheinkman is not always guaranteed. However the Cournot outcome is still robust in the sense that given sufficiently large capacities this equilibrium holds. If capacities are sufficiently small, firms decide to produce at their full capacity and set a price which clears the market at the given level of output.

DOES TRUST PROMOTE ENTREPRENEURSHIP IN A DEVELOPING COUNTRY?

2018 ◽  
Vol 63 (05) ◽  
pp. 1385-1403 ◽  
Author(s):  
KITAE SOHN ◽  
ILLOONG KWON
Keyword(s):  
Developing Countries ◽  
Property Rights ◽  
Least Squares ◽  
Developing Country ◽  
Ordinary Least Squares ◽  
Community Level ◽  
Two Stage ◽  
The Us ◽  
The Difference ◽  
The Individual

Trust was found to promote entrepreneurship in the US. We investigated whether this was true in a developing country, Indonesia. We failed to replicate this; this failure was true whether trust was estimated at the individual or community level or whether ordinary least squares (OLS) or two stage least squares (2SLS) was employed. We reconciled the difference between our results and those for the US by arguing that the weak enforcement of property rights in developing countries and the consequent hold-up problem make it more efficient for entrepreneurs to produce generic goods than relationship-specific goods—producing generic goods does not depend on trust.

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