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

Abstract

This research discusses small decision making prob lems and petty corruption as their practical applications with a structured economic e xperiment. One of examples of petty corruption considered includes demands for petty bribes by tra ffic officials followed by police. We examine that it is caused by subjective underweighting of rare events and its objective probabilities. This literature re ports results of an experiment, which reveals that the su bjects 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 o ften, but not all the time, to maximise his/her exp ected utility. This tendency is the opposite of the overw eighting 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 examin ed along with the expected utility model. The model we ll captures results of the experiment and it assert s that it is theoretically-optimal decision to do the petty corrupt behaviour (to receive petty bribes) occasionally for the risk-seeking official, who sub jectively underweight rare event and its probabilit y.