Esther Hauk

On the Cultural Transmission of Corruption

We provide a cultural explanation to the phenomenon of corruption in the framework of an overlapping generations model with intergenerational transmission of values. We show that the economy has two steady states with different levels of corruption. The driving force in the equilibrium selection process is the education effort exerted by parents which depends on the distribution of ethics in the population and on expectations about future policies. We propose some policy interventions which via parents efforts have long-lasting effects on corruption and show the success of intensive education campaigns. Educating the young is a key element in reducing corruption successfully.

Regular ArticleOn the Cultural Transmission of Corruption

We provide a cultural explanation to the phenomenon of corruption in the framework of an overlapping generations model with intergenerational transmission of values. We show that the economy has two steady states with different levels of corruption. The driving force in the equilibrium selection process is the education effort exerted by parents which depends on the distribution of ethics in the population and on expectations about future policies. We propose some policy interventions which via parents efforts have long-lasting effects on corruption and show the success of intensive education campaigns. Educating the young is a key element in reducing corruption successfully. Journal of Economic Literature Classification Numbers: D10, J13.

Choice of Partners in Multiple Two-Person Prisoner's Dilemma Games: An Experimental Study

We examine the effect of unilateral and mutual partner selection in the context of prisoners dilemmas experimentally. Subjects play simultaneously several finitely repeated two-person prisoners dilemma games. We find that unilateral choice is the best system. It leads to low defection and fewer singles than with mutual choice. Furthermore, with the unilateral choice setup we are able to show that intending defectors are more likely to try to avoid a match than intending cooperators. We compare our results of multiple games with single game PD-experiments and find no difference in aggregate behavior. Hence the multiple game technique is robust and might therefore be an important tool in the future for testing the use of mixed strategies.

Wild bids. Gambling for resurrection in procurement contracts

This paper analyses the problem of abnormally low tenders in the procurement process. Limited liability causes firms in a bad financial situation to bid more aggressively than financially healthy firms in the procurement auction. Therefore, it is likely that the winning firm is a firm in financial difficulties with a high risk of bankruptcy. The paper focuses on the regulatory practice of surety bonds to face this problem. We show that the use of surety bonds reduces and sometimes eliminates the problem of abnormally low tenders. We provide a characterization of the optimal surety bond and show that the U.S. practice of requiring that surety bonds cover over 100% of the contract price can be excessive, implying overinsurance to the problem of abnormally low tenders.

Choice of Partners in Multiple Two-Person Prisoner's Dilemma Games

The effect of unilateral and mutual partner selection in the context of prisoners dilemmas is examined. Participants played simultaneously several finitely repeated, two-person prisoners dilemma games. Results show that unilateral choice leads to lower defection and fewer exits than mutual choice. In the unilateral-choice setup, intending defectors are more likely to exit than intending cooperators. Implications of these findings in the political context are discussed.

Secret information acquisition in cournot markets

Summary. Two-stage game models of information acquisition in stochastic oligopolies require the assumption that firms observe the precision of information chosen by their competitors before determining quantities. This paper analyzes secret information acquisition as a one-stage game. Relative to the two-stage game firms are shown to acquire less information. Policy implications based on the two-stage game yield, therefore, too high taxes or too low subsidies for research activities. For the case of heterogeneous duopoly we briefly discuss comparative statics results.

Leaving the Prison: Permitting Partner Choice and Refusal in Prisoner's Dilemma Games

We propose a simple rule of thumb on how to choose ones game partner thatallows economic agents who care about the future to learn to cooperate inthe iterated prisoners dilemma. This rule of thumb uses partner selectionstrategically to reward cooperative behavior and teach defectors a lesson.This reward and punishment scheme leads to higher payoffs of non-exploitivestrategies and slowly converts defectors, who are attracted by the higherpayoffs, into non-exploitive types. Simulations show that the convergence tostable cooperative behavior is rather fast.

On forward induction and evolutionary and strategic stability

We analyze which normal form solution concepts capture the notion of forward induction, as defined by van Damme (JET, 1989) in the class of generic two player normal form games preceded by an outside option. We find that none of the known strategic stability concepts (including Mertens stable sets and hyperstable sets) captures this form of forward induction. On the other hand, we show that the evolutionary concept of EES set (Swinkels, JET, 1992) is always consistent with forward induction.

Allocating Ideas: Horizontal Competition in Tournaments

We develop a stylized model of horizontal and vertical competition in tournaments with two competing firms. The sponsor cares not only about the quality of the design but also about the design location. A priori not even the sponsor knows his preferred design location, which is only discovered once he has seen the actual proposals. We show that the more efficient firm is more likely to be conservative when choosing the design location. Also, to get some differentiation in design locations, the cost difference between contestants can be neither too small nor too big. Therefore, if the sponsor mainly cares about the design location, participation in the tournaments by the two lowest-cost contestants cannot be optimal for the sponsor.

Economic Integration and Corruption: The Corrupt Soul of the European Union

We study the link between corruption and economic integration. We show that if an economic union establishes a common regulation for public procurement, the country more prone to corruption benefits more from integration. However, if the propensities to corruption are too distinct, the less corrupt country will not be willing to join the union. This difference in corruption propensities can be offset by a difference in efficiency. We also show that corruption is lower if integration occurs. A panel data analysis for the European Union confirms that more corrupt countries are more favorable towards integration but less acceptable as potential new members.