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Journal of Economics

, Volume 64, Issue 2, pp 177–193 | Cite as

On the persistence of corruption

  • Herbert Dawid
  • Gustav Feichtinger
Articles

Abstract

This paper tries to answer the question why the phenomenon of corruption seems to be inherently existent in any society. The dynamic model presented shows how rational agents may generate multiple equilibria of corruption within the same kind of socio-economic system. We assume that the individual disutility caused by the loss of reputation from a corrupt transaction depends on the acceptance of corrupt behavior by the representative individual. Depending on the values of some key parameters like the marginal utility of corrupt behavior and the initial acceptance of corruption a completely corrupt equilibrium where all people completely accept corruption or a completely honest equilibrium where corruption is not accepted at all may be the limit state of the optimal path. Also inner equilibria in-between exist; however, they are always unstable.

Keywords

optimal control corruption social norms multiple equilibria reputation dynamics 

JEL classification

K42 C61 C62 

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Copyright information

© Springer-Verlag 1996

Authors and Affiliations

  • Herbert Dawid
    • 1
  • Gustav Feichtinger
    • 2
  1. 1.Institut für BetriebswirtschaftslehreUniversität WienWienAustria
  2. 2.Institut für Ökonometrie, Operations Research und SystemtheorieTechnische Universität WienWienAustria

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