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

Abstract

This research discusses small decision making problems and petty corruption as their practical applications with a structured economic experiment. One of examples of petty corruption considered includes demands for petty bribes by traffic officials followed by police. We examine that it is caused by subjective underweighting of rare events and its objective probabilities. This literature reports results of an experiment, which reveals that the subjects 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 often, but not all the time, to maximise his/her expected utility. This tendency is the opposite of the overweighting 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 examined along with the expected utility model. The model well captures results of the experiment and it asserts that it is theoretically-optimal decision to do the petty corrupt behaviour (to receive petty bribes) occasionally for the risk-seeking official, who subjectively underweight rare event and its probability.