A Dynamic Analysis of Schelling’s Binary Corruption Model: A Competitive Equilibrium Approach

Corruption as a Self-Reinforcing Trap: Implications for Reform Strategy

“…That said, in multiple equilibrium cases like the one depicted in Figure 6, reformers may have at their disposal at least two strategies that would not be feasible in the single-equilibrium case. The first is a temporary crackdown that lowers the P-I curve sufficiently to eliminate the high-corruption equilibrium, forcing a dramatic shift to the low-corruption equilibrium; this can produce a permanent reduction in corruption even after the crackdown ends and the P-I curve reverts to its original position (Rose-Ackerman 1999, p. 56;Andvig 1991;Caulkins 2014;Feichtinger 2000;Lui 1986;Nabin & Bose 2008;Bar-Gill & Harel 2001). Figure 7 illustrates the idea.…”

“…6-7, emphasis omitted), even though that conclusion does not follow automatically from the premise.15 An S-shaped P-I curve may arise if individuals' propensity for corruption (based on factors other than corruption's prevalence in the community) has a bell-shaped distribution(Andvig & Moene 1990).16 This is an admittedly informal characterization of the convergence process, based on a static model. While this loose approach is standard in most of the literature, some papers have deployed more sophisticated techniques to formally model the convergence path in a dynamic system (e.g.,Caulkins et al 2013Caulkins et al , 2014Rinaldi et al 1998). So far, though, the research in this vein does not seem to have produced sufficiently clear and useful substantive insights to justify the additional mathematical complexity that these models entail.…”

Nobel laureates’ contributions to and impacts on operations management

“…Row 12: The comment by Pauly (1968) on Arrow (1963) that full coverage may not be optimal under conditions of moral hazard. That along with a further comment by Becker (1968), Stigler (1970), Becker and Stigler (1974), Schelling (1978) Sethi (1979), Feichtinger (1983, Gerchak and Parlar (1985), Caulkins et al (2014) Kurz (1970) Sethi (1973), Pekelman (1974), Hartl and Sethi (1984), Hartl (1992), Skiba and Skiba (2021) 9 Peak-load pricing Williamson (1966Williamson ( , 1974 de Salvia (1969), Chao (1983) Transaction cost economics Coase (1937Coase ( , 1960Coase ( , 1992, Williamson (2008Williamson ( , 2010 Bajari and Tadelis (2001), Argyres and Mayer (2007), Xue and Field (2008), Handley (2017), Ketokivi and Mahoney (2020) *Table 4 by Row Numbers: Row 1: Caines et al (1981) provide a method of multivariable causality detection. Row 2: See Sethi (2021a) for the relationship between certainty equivalent and the separation principle of the Kalman (1960) filter.…”