Social Structure and Cultures of Corruption

Corruption often creates a “briber’s dilemma”: each of the “clients” competing for a rent allocated by a government official has an incentive to pay bribes to try to obtain preferential treatment, but they would all be better off if they could mutually commit not to pay bribes. This paper uses a model of linked games to show how informal relationships among the clients may enable them to enforce agreements (or norms) against paying bribes, and how historical events can lead to the development of a “culture” of corruption which can subsequently prove hard to dislodge. JEL classification: K42, D73, Z13