Game-theoretic models of corruption

Abstract

Games of inspection and corruption are well developed in the game-theoretic literature. However, there are only a few publications that approach these problems from the evolutionary point of view. We develop both the generalised evolutionary approach in the spirit of the general framework of pressure and resistance games developed previously by the author and the approach from the point of view of the theory of mean-field games. The modeling include the analysis of the two-level hierarchy, where a local inspector can be corrupted and is further controlled by the higher authority, thus combining the modeling of inspection and corruption in a unifying setting. Developing the generalised evolutionary approach we obtain a result that can be called the “principle of quadratic fines”: starting from the quadratic growth of the fine function (which can be looked at as the major tool of the mechanism design of the central authority), one can effectively control the level of violations. Concrete settings that we have in mind are illegal logging, the sales of products with substandard quality, and tax evasion