Evolutionary effects of non-compliant behavior in public procurement

Abstract The main goal of the present work is to analyze the evolution of non-compliant firms in public procurement. The dynamic setting is formalized by an evolutionary adaptation process which describes whether honest or dishonest behavior prevails in society at any given time. Firms will either behave in an honest or dishonest way depending on the payoffs and the type of firms they meet, through a word-of-mouth process. The honesty propensity assumption is introduced. By making use of both analytical tools and numerical techniques, we show that monomorphic configurations may represent stable or unstable equilibria, while coexistence of both groups in the steady state is possible and its asymptotic stability is sensitive to parameter modifications. Moreover, a rich variety of integrated dynamic behavior can be observed due to different kinds of bifurcations, smooth or border collision. A social planner can evaluate social and/or fiscal policies to manipulate preferences for honest behavior.