Research digital skills training 2021
Anti-corruption regulations for promoting socially responsible practices
Associate Professor Srividya Jandhyala, ESSEC Business School, Singapore; Associate Professor Fernando S. Oliveira, Graduate School of Management, University of Auckland
Firms regularly encounter pressure to engage in corrupt and fraudulent practices in the course of their operations, in supply chain management activities, and in procurement auctions. In particular, corruption – the abuse of public power for private gain – is considered to be the norm rather than the exception around the world, and is highly unreported and difficult to track. In recent years, regulatory efforts at tackling corruption have changed in two significant ways. First, international anti-corruption regulations hold firms accountable in their home country for behavior in foreign countries.
We analyze how firm heterogeneity, within two firm types (domestic and multinational) influences the behavior of the industry and the short and long-term strategies of the firms using an agent-based model, which is able to accommodate firms with different objective functions. The simulation converged to the neighborhood of the Nash equilibrium. In terms of the speed of convergence of the agent-based simulation to the Nash equilibrium it can be faster or slower depending on the prior knowledge of players regarding the optimal strategy.
Heterogeneous firms learn the optimal bribing probability.
Impact of parametric uncertainty on the optimal bribing probability.
In particular, in some cases the strategic response of domestic firms may well be to increase their own bribing behavior when competing with multinational firms whose actions are exposed to greater monitoring and sanction through international rules and regulations, even if the overall industry bribing probability declines. Thus, increasing bribe penalties for multinational firms can have an adverse impact on domestic firms’ bribing behavior if they face consistently lower penalties. Better monitoring and increased penalties on multinational firms through international anti-corruption initiatives may be insufficient in constraining bribing behavior.
We very gratefully acknowledge the Centre for eResearch, the University of Auckland, for access to the virtual machines.