Game Theory and Government Contracts

Government contractors work slow on purpose because of game theoretic underpinnings of the “industry”.

The government will pay a contractor 5 million to get a job done. If the job is done by the contractor in half the time, then technically they should return 2.5 million. This incentivises government contractors to work slowly.

This may seem inefficient, but actually makes sense because the government is not a corporation, and does not have any incentive to make money. Thus, this mechanism is used so that there will be less corruption, and if there is corruption, at least the money is going to the working Joe of the company, and not the boss of the company.

Written on