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Committing to transparency to resist corruption

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  • Koessler, Frédéric
  • Lambert-Mogiliansky, Ariane

Abstract

This paper studies firms' incentives to commit to transparent behavior in a competitive procedure modeled as an asymmetric information beauty contest managed by a corrupt agent. In his evaluation of firms' offers for a public contract the agent has some discretion to favor a firm in exchange for a bribe. While unilateral commitment to transparency is never incentive compatible, under some circumstances a voluntary but conditional commitment mechanism can eliminate corruption. A low quality firm may prefer not to commit only when the agent's discretion is strong and the market's profitability is small. In that situation, the high quality firms commit when commitment decisions are kept secret, but some conditions on firms' beliefs are required when commitment decisions are publicly announced. A mechanism combining both conditionality and a reward (a transparent selection advantage that needs not be large) allows complete elimination of corruption.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 100 (2013)
Issue (Month): 1 ()
Pages: 117-126

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Handle: RePEc:eee:deveco:v:100:y:2013:i:1:p:117-126

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Commitment; Bribery; Competitive procedures; Transparency;

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References

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  1. Sophie Bade & Guillaume Haeringer & Ludovic Renou, 2008. "Bilateral Commitment," Discussion Papers in Economics 08/20, Department of Economics, University of Leicester.
  2. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  3. Simon, Leo K & Zame, William R, 1990. "Discontinuous Games and Endogenous Sharing Rules," Econometrica, Econometric Society, vol. 58(4), pages 861-72, July.
  4. Andersson, Per & Hultén, Staffan & Valiente, Pablo, 2005. "Beauty contest licensing lessons from the 3G process in Sweden," Telecommunications Policy, Elsevier, vol. 29(8), pages 577-593, September.
  5. Rose-Ackerman,Susan, 1999. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9780521659123, April.
  6. Kalai, Adam Tauman & Kalai, Ehud & Lehrer, Ehud & Samet, Dov, 2010. "A commitment folk theorem," Games and Economic Behavior, Elsevier, vol. 69(1), pages 127-137, May.
  7. Ariane Lambert-Mogiliansky & Grigory Kosenok, 2009. "Fine-Tailored for the Cartel-Favoritism in Procurement," Review of Industrial Organization, Springer, vol. 35(1), pages 95-121, September.
  8. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
  9. Rose-Ackerman,Susan, 1999. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9780521632935, April.
  10. Celik, Gorkem & Peters, Michael, 2011. "Reciprocal Relationships and Mechanism Design," Microeconomics.ca working papers gorkem_celik-2011-19, Vancouver School of Economics, revised 01 Aug 2011.
  11. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  12. Robinson, James A. & Torvik, Ragnar, 2005. "White elephants," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 197-210, February.
  13. Renou, Ludovic, 2009. "Commitment games," Games and Economic Behavior, Elsevier, vol. 66(1), pages 488-505, May.
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Cited by:
  1. Frédéric Koessler & Ariane Lambert-Mogiliansky, 2012. "Optimal Extortion and Political Risk Insurance," PSE Working Papers halshs-00672963, HAL.
  2. repec:hal:wpaper:halshs-00672963 is not listed on IDEAS
  3. Celik, Gorkem & Peters, Michael, 2011. "Reciprocal Relationships and Mechanism Design," Microeconomics.ca working papers gorkem_celik-2011-19, Vancouver School of Economics, revised 01 Aug 2011.

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