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Petty corruption: A game‐theoretic approach

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  • Ariane Lambert‐Mogiliansky
  • Mukul Majumdar
  • Roy Radner

Abstract

The paper explores a game‐theoretic model of petty corruption involving a sequence of entrepreneurs and a track of bureaucrats. Each entrepreneur's project is approved if and only if it is cleared by each bureaucrat. The project value is stochastic; its value is observed only by the entrepreneur, but its distribution is common knowledge. Each bureaucrat clears the project only if a bribe is paid. The bribe for qualified projects (“extortion”) and unqualified projects (“capture”) may differ. We identify the nature and welfare implications of different types of equilibria under appropriate technical assumptions on the structure of the game.

Suggested Citation

  • Ariane Lambert‐Mogiliansky & Mukul Majumdar & Roy Radner, 2008. "Petty corruption: A game‐theoretic approach," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(2), pages 273-297, June.
    • Handle: RePEc:bla:ijethy:v:4:y:2008:i:2:p:273-297
    DOI: 10.1111/j.1742-7363.2008.00078.x
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    References listed on IDEAS

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    1. Kimberly Ann Elliott, 1997. "Corruption and the Global Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 12, October.
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    Cited by:

    1. Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2009. "Strategic analysis of petty corruption with an intermediary," Review of Economic Design, Springer;Society for Economic Design, vol. 13(1), pages 45-57, April.
    2. Lambert-Mogiliansky, Ariane & Majumdar, Mukul & Radner, Roy, 2007. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," Journal of Development Economics, Elsevier, vol. 83(2), pages 351-367, July.
    3. Seung Yoo, 2008. "Petty corruption," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(2), pages 267-280, November.
    4. Hossain, Ashrafee Tanvir & Kryzanowski, Lawrence, 2021. "Political corruption and Corporate Social Responsibility (CSR)," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    5. Roberto Burguet & Juan José Ganuza & José Garcia Montalvo, 2016. "The microeconomics of corruption. A review of thirty years of research," Economics Working Papers 1525, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Krishna Athreya & Monisankar Bishnu, 2010. "On the efficiency of ‘single window’," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 43(2), pages 207-226, May.
    7. Hong, Fuhai & Yin, Zhendong, 2020. "Collusion, extortion and the government’s organizational structure," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 1-23.
    8. Stamatios Katsikas & Vassili Kolokoltsov & Wei Yang, 2016. "Evolutionary Inspection and Corruption Games," Games, MDPI, vol. 7(4), pages 1-25, October.
    9. Drugov, Mikhail, 2010. "Competition in bureaucracy and corruption," Journal of Development Economics, Elsevier, vol. 92(2), pages 107-114, July.
    10. Krishnendu Ghosh DASTIDAR & YANO Makoto, 2017. "In many emerging economies corruption, poor quality of information and poor governance lead to restricted entry. In this paper we analyze the determinants of the .height.of entry barrier in a developi," Discussion papers 17010, Research Institute of Economy, Trade and Industry (RIETI).
    11. Hideki Sato, 2022. "Is it reasonable to legalize tea money?," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(2), pages 267-272, October.
    12. V. N. Kolokoltsov & O. A. Malafeyev, 2017. "Mean-Field-Game Model of Corruption," Dynamic Games and Applications, Springer, vol. 7(1), pages 34-47, March.
    13. Hossain, Ashrafee Tanvir & Hossain, Takdir & Kryzanowski, Lawrence, 2021. "Political corruption and corporate payouts," Journal of Banking & Finance, Elsevier, vol. 123(C).
    14. Perla, Abhinav & Nikolaev, Alexander & Pasiliao, Eduardo, 2018. "Workforce management under social Link Based Corruption," Omega, Elsevier, vol. 78(C), pages 222-236.

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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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