The prisoners' dilemma of disobeying the rules: is corruption combating a cure for both markets and non-markets?

Given the prevalent phenomenon of disobeying the existent formal rules in China, commercial and environmental protests are used as proxies for this disobeying dilemma in competitive markets and non-markets. Driven by a popular view that corruption is the source of this dilemma, two sequential games with two common components -- protests and corruption --are proposed to model the multi-stage interactions between three players (a group of citizens, a firm, a government official). The model suggests that increased top-down inspection frequencyon government officials should be able to alleviate the dilemma. Combining this game theory approach with a unique new dataset on protests, the effect of the recent wave of anticorruptionmovement in mainland China is calibrated for each province. The results suggest that the anticorruption movement helped 13 provinces to regulate the housing market (reduced commercial protests), on the other hand, it provoked more environmental protests in 9 provinces.