(job market paper, R&R at the International Economic Review)
Abstract: This paper studies how an agent’s propensity to accept bribes depends on the organizational structure, which we model with a broad set of random networks that contains two canonical special cases. In hierarchies, agents’ best responses exhibit strategic substitutability, with bribe taking being risker if others accept more bribes, for it is then easier for a corruption investigation to trace through bribe transactions to locate bribe takers. On the contrary, best responses in flat, two-layer networks feature strategic complementarity, as more bribe acceptances better protect criminal subordinates from being caught, reducing the risk of bribe taking. While incentives differ across networks, we show that for any of our random network, in equilibrium, increasing its density always deters agents from accepting bribes. Nevertheless, opposite results for hierarchies and two-layer networks are obtained if we make the number of subordinates each agent monitors more evenly distributed. We use this model to point out a corruption identification problem and propose a remedy to it.
Conferences: European Winter Meeting of the Econometric Society 2022; 33rd Stony Brook International Conference on Game Theory; 2022 Conference on Mechanism and Institution Design; 2022 Trans-Atlantic Doctoral Conference
Cooperative Games with Parochial Fairness Concerns
Abstract: This paper studies how parochial fairness concerns – a player’s incentives to compare wages with those in the same group – affect group deviations. We propose a new theoretical framework based on the transferable-utility cooperative game through extending the utility space to incorporate in players’ other-regarding incentives. We then apply in the Fehr-Schmidt utility specification to study how parochial fairness concerns govern income redistribution outcomes after coalitional deviations and the structures of core allocations. We find that while both disadvantageous and advantageous inequality aversion exacerbate income inequality after a coalition deviates, advantageous inequality inclination ameliorates it. In addition, if players are moderately averse to advantageous inequality, the grand-coalition allocation most robust to coalitional deviations is the “tyranny-of-the-majority” allocation that gives the single poorest player indefinitely small amount and equates the other players’ incomes.