Game-Theoretic Insights Concerning Key Business Ethics Issues Occurring in Emerging Economies

Game-Theoretic Insights Concerning Key Business Ethics Issues Occurring in Emerging Economies

Duane Windsor (Rice University, USA)
DOI: 10.4018/978-1-4666-7476-9.ch003
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Abstract

This chapter identifies some game-theoretic insights concerning several key issues of business ethics typically occurring in emerging economies. The chapter explicates four elements in this sequence: nature of game theory, characteristics of emerging economies, fundamentals of business ethics, and key business ethics issues. The chapter emphasizes useful insights of game theory rather than undertaking formal modeling (examples are noted in references). Game theory assists reasoning about strategic scenarios for businesses. A multinational entity operates within layers of institutions and norms from the international to the national and sub-national levels. Such institutions and norms help structure the complex environment within which a multinational entity operates. The approach in this chapter is to inquire into certain specific decision scenarios available in the extant literature as instances of important classes of decision problems and to suggest game-theoretic responses. These scenarios concern long-term sustainable business models, corporate values, and corporate reputation.
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Introduction

The purpose of this chapter is to identify useful game-theoretic insights concerning key issues of business ethics in emerging economies. An insight should be of assistance to understanding and implementing business strategy and government policy. Better understanding and implementation should then help develop increased international consensus on ethical and legal standards. An example is the problems arising from efforts to reduce corruption (bribery, extortion, and facilitation) which is widespread in emerging and developing countries. It is important to understand the causes and effects of the various forms of corruption in order to design and implement effective anti-corruption measures by national governments, international institutions, and multinational entities. The study draws on four elements which will be addressed in the following sequence: game theory, emerging economies, business ethics, and key issues.

The chapter is structured as follows. The following section explains in general terms game theory and criteria for defining emerging economies. The explanations are background for addressing key issues of business ethics. The next section reviews the business ethics literature concerning game theory. The subsequent section identifies game-theoretic insights for four key issues of business ethics in emerging economies. (Some illustrations are drawn from developing economies; the rationale is explained below in the sub-section on defining emerging economies, as the dividing line is evolving and gray.) The concluding section of the chapter emphasizes the findings and their implications for business ethics in emerging economies.

Key Terms in this Chapter

Pollution and Tax Havens: A country which may be attractive to multinational enterprises because of favorable laws permitting pollution or tax avoidance.

Best Available Control Technology (BACT): Best technology for controlling environmental pollution disregarding cost-effectiveness.

Business Ethics: Normative (or moral) standards for business conduct, typically in the form of prohibitions against committing wrong actions (particularly with bad effects for others) and admonitions for undertaking right actions (particularly with good effects for others).

Substitute Public Goods: Public goods provided by businesses in partial substitution for in- capacity of governments to handle such provision.

Strategic Scenarios: Classes of decision problems for businesses that can be studied in game-theoretic models of actors whose strategies are interdependent under conditions of conflict and/or cooperation.

Sustainable Business Model: A model for conducting a business on a basis that emphasizes long-run profitability through stakeholder engagement.

Civil Disobedience: A normative duty to disobey positive law.

Multinational Enterprises (MNEs): Businesses (whether headquartered in advanced or developing countries) which operate in multiple countries.

Bribery, Extortion, and Facilitation: Bribery is an illegal payment to a public official or private individual intended to induce a policy decision; extortion is a demand by a public official or private individual for such payment using some explicit or implicit threat; facilitation, whether legal or illegal, is a gratuity payment to a minor level public official for expediting legally required action.

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