An Experimental Study of Petty Corrupt Behaviour in Small Decision Making Problems

Abstract

This research discusses small decision making problems and petty corruption as their practical applications with a structured economic experiment. One of examples of petty corruption considered includes demands for petty bribes by traffic officials followed by police. We examine that it is caused by subjective underweighting of rare events and its objective probabilities. This literature reports results of an experiment, which reveals that the subjects tended to subjectively underweight rare outcomes when they relied on feedback in small decision making problems. Underweighting of rare events lead the subjects to choose a risky option often, but not all the time, to maximise his/her expected utility. This tendency is the opposite of the overweighting of rare outcomes observed in mainstream big description-based decision problems. It is revealed that an individual petty corrupt behaviour is a consequence of the theoretically-optimal behaviour for the risk-seeking decision-maker. This is examined along with the expected utility model. The model well captures results of the experiment and it asserts that it is theoretically-optimal decision to do the petty corrupt behaviour (to receive petty bribes) occasionally for the risk-seeking official, who subjectively underweight rare event and its probability.

Perfect Bayesian vs. Imperfect Bayesian in Small Decision Making Problems

“…3) There are significant differences between small decisions and big decisions. Firstly, small decisions are generally studied in a "(repeated-play) feedback-based" paradigm (e.g., Barron and Erev, 2003;Erev and Barron, 2005;Fujikawa, 2005;Fujikawa and Oda, forthcoming), whereas big decisions are naturally studied in a "(one-shot) description-based" paradigm (e.g., Allais, 1953;Kahneman and Tversky, 1979). Secondly, in big descriptionbased decision making (BDM), the decision maker takes a decision that is known to have a significant bearing on her/his welfare via the well-defined return and cost functions.…”

“…Previous studies on SDM under uncertainty (Barron and Erev, 2003;Erev and Barron, 2005) and those on SDM under risk (Fujikawa, 2005(Fujikawa, , 2006 conducted laboratory experiments, employing three choice problems: Problem 1: (4, 0.8) or (3, 1); Problem 2: (4, 0.2) or (3, 0.25); Problem 3: (32, 0.1) or (3, 1). Here, let (V , p) be an option that yields an outcome of V points with probability p and zero point with probability (1-p).…”

“…On the other hand, small decisions are made without a careful evaluation of the possible payoff distributions. In the face of small decisions, the decision makers take little time and efforts in making decisions; they are presented with (Fujikawa, 2005;Fujikawa and Oda, forthcoming) or without (Barron and Erev, 2003;Erev and Barron, 2005) a complete description of trivial real choice problems and asked to make selections many times (i.e., a repeated-play paradigm). I will briefly review these previous studies in the following section.…”

A Laboratory Study of Curiosity Behavior in Feedback-Baased Decisions

“…Second, each single choice is of little consequence in terms of net payoffs. Third, the DMs take little efforts and time in making decisions (Fujikawa, 2005;Fujikawa and Oda, 2005). The importance of shedding light on small feedback-based decision problems in investigating curiosity behavior is particularly concerned with curiosity about problematical behavior among adolescents, such as their frequent smoking.…”