A PUBLIC CONTRACTING EVOLUTIONARY GAME WITH CORRUPTION

In this paper, firms are randomly matched from a continuous population to play a public contracting game (say, building a bridge). Price is given, so firms compete in quality; the higher the quality offer, the less the profit. According to the official rules of the contest, the firm bidding the highest quality wins; however, we consider the possibility that firms attempt to corrupt the public officer in charge in order to be sure to win even if bidding a lower quality (quality bids are not publicly observable). Whether or not firms attempt to corrupt depends on how rewarding corruption is w.r.t. being honest. Within a dynamic evolutionary framework, we investigate how ''social conventions'' with or without corruption are established under various assumptions concerning the corruptability of the public officer and the possibility of an external monitoring of the officer's decisions by a ''super partes'' authority.