Institutions matter: essays on the determinants and consequences of socio-political institutions

ONLY AVAILABLE FOR CONSULTATION AT ASTON UNIVERSITY LIBRARY WITH PRIOR ARRANGEMENT This thesis seeks to contribute to the socio-political literature. It comprises of three individual chapters examining the determinants and consequences of different social-political institutional factors. Specifically, the first study combines game theoretical and empirical techniques to examine how bureaucrats favour other agents within their social group and the effects this will have on the level of corruption in the economy. To this end, I develop a simple model of allocation of time between economic activities and leisure (time spent building social network ties), to illustrate the underlying causal mechanism between social network and corruption. It shows that large social networks and low levels of economic activities provides the condition for high levels of corruption. However, the ability of the government to punish corruption through well-established laws and property rights enforcement acts as a deterrent to corruption. he second work also combines game theoretical and empirical techniques. It aims to clarify the relationship between the degree of competition and political influence of firms, paying particular attention to the level of government regulations that exist in the countries in which the firms operates. The interplay between economic and political institutions is vital to any analysis on understanding the workings of political influence. The third study is purely empirical. It examines the role of two types of business network, namely, political connections and business group affiliations on a firm’s performance. Evidence was provided on Chinese firms’ performance during the 2008 financial crisis.

Developing real option game models

By mixing concepts from both game theoretic analysis and real options theory, an investment decision in a competitive market can be seen as a ‘‘game’’ between firms, as firms implicitly take into account other firms’ reactions to their own investment actions. We review two decades of real option game models, suggesting which critical problems have been ‘‘solved’’ by considering game theory, and which significant problems have not been yet adequately addressed. We provide some insights on the plausible empirical applications, or shortfalls in applications to date, and suggest some promising avenues for future research.

On the adoption of privacy-enhancing technologies

We propose a model, based on the work of Brock and Durlauf, which looks at how agents make choices between competing technologies, as a framework for exploring aspects of the economics of the adoption of privacy-enhancing technologies. In order to formulate a model of decision-making among choices of technologies by these agents, we consider the following: context, the setting in which and the purpose for which a given technology is used; requirement, the level of privacy that the technology must provide for an agent to be willing to use the technology in a given context; belief, an agent’s perception of the level of privacy provided by a given technology in a given context; and the relative value of privacy, how much an agent cares about privacy in this context and how willing an agent is to trade off privacy for other attributes. We introduce these concepts into the model, admitting heterogeneity among agents in order to capture variations in requirement, belief, and relative value in the population. We illustrate the model with two examples: the possible effects on the adoption of iOS devices being caused by the recent Apple–FBI case; and the recent revelations about the non-deletion of images on the adoption of Snapchat.