On the economics of whistle-blowing behavior: the role of incentives

Villena, Mauricio G. and Villena, Marcelo J. (2010): On the economics of whistle-blowing behavior: the role of incentives.

Abstract

The role of whistle-blowing as a mechanism for deterring corruption has been conspicuously neglected in the economic literature. This is quite surprising given the increase in legislation aimed at preventing corruption that includes whistle-blowing clauses and the extensive literature on whistle-blowing outside economics. In fact, we know of no formal economic model that deals squarely with the analysis of the role and potential impact of whistleblowing on the persistence of corruption in organizations. Therefore, in an attempt to at least partially fill this gap, we present a theoretical model for approaching the issue, focusing specifically on the role of economic incentives to encourage whistle-blowing behaviour. We model corruption as a social norm of behaviour using elements of evolutionary game theory (EGT). We use the concept of replicator dynamics to explore the local asymptotical stability of several types of behaviour within organizations: (i) honest, corrupt, and honest whistle-blowing and (ii) honest, corrupt whistle-blowing, and honest whistle-blowing.

• Item Type: MPRA Paper
• English Title: ON THE ECONOMICS OF WHISTLE-BLOWING BEHAVIOUR: THE ROLE OF INCENTIVES
• Language: English
• Keywords: Corruption, whistle-blowing, social norms, evolutionary games
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games

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