Corruption, Cooperation and Endogenous Time Discount Rates

Marianna A Klochko and Peter C Ordeshook

Public Choice, 2003, vol. 115, issue 3-4, 259-83

Abstract: Virtually all uses of repeated games to study of cooperation assume that people's time discount rates are exogenous and fixed. Here we offer an evolutionary game embedded in a multi-period model of investment and consumption in which individual time discounts are determined by their convergence to values determined by Evolutionary Stable Strategies. Our substantive motivation, though, is corruption and its relationship to economic growth. To understand the observed relationship between levels of corruption and economic indicators of social welfare, we argue that corruption is a form of cooperation that requires close interpersonal monitoring. If we assume, moreover, that when people discount the future greatly the only sustainable forms of cooperation are those that allow for close monitoring, then our analysis can be interpreted as a dynamic model of the relationship between corruption and investment. Copyright 2003 by Kluwer Academic Publishers

Date: 2003
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