Date of Original Version



Technical Report

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Abstract or Description

Abstract: "In this paper we model the evolution of a system of corruption. We assume a fixed population of players that play a series of supergames with randomly chosen opponents. Each stage game in the supergames is a prisoner's dilemma. We show the conditions under which an equilibrium of corruption exists and is stable. We assume there are two types of players, adaptive and nonadaptive ones. Among the nonadaptive players, there is a small proportion that always chooses to be conditionally honest in every new supergame. Furthermore, we assume that corruption generates small but cumulative social costs. We show that the joint presence of a small group of 'honest' players and of cumulative social costs is sufficient to drive the system to a critical (i.e., catastrophic) point in which the stable equilibrium of corruption suddenly becomes unstable. When the system has reached such a catastrophic point, a small perturbation is enough to drive it towards a different equilibrium. We show that the new equilibrium is cooperative, in that all players choose to be conditionally honest, and that a cooperative equilibrium is always stable under our model's conditions."