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Preemptive collusion among corruptible law enforcers

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  • Samuel, Andrew
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    Abstract

    This paper considers collusion between a supervisor and an agent within a Principal-Supervisor-Agent model. Other papers consider the possibility of collusion after the supervisor has exerted costly effort to obtain hard ("verifiable") evidence regarding the agent's actions, information which, if reported would result in the agent being fined with a certain probability. That is, collusion occurs because the supervisor may accept a bribe in exchange for hiding the information he has obtained. This paper allows the supervisor and the agent to enter into a collusive contract either before or after the supervisor has exerted effort to find verifiable information regarding the agent's actions. The former type of collusion, which occurs after the supervisor has exerted effort, entails ex-post corruption, while the latter, which occurs before the supervisor has exerted effort, entails preemptive corruption. This paper shows that although raising the supervisor's reward discourages ex-post corruption, it can simultaneously encourage preemptive corruption. Hence, raising the supervisor's reward will not always discourage collusion. This result further implies that though privatizing law enforcement can always be used to eliminate ex-post corruption, it cannot be used to eliminate preemptive corruption. Furthermore, when compared to ex-post collusion, an equilibrium without corruption is always socially preferred. However, when compared to preemptive collusion, an equilibrium without corruption may not always be socially preferred.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 71 (2009)
    Issue (Month): 2 (August)
    Pages: 441-450

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    Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:441-450

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

    Related research

    Keywords: Bribery Collusion Corruption Moral hazard Crime prevention;

    References

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    1. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
    2. Baliga, Sandeep, 1999. "Monitoring and Collusion with "Soft" Information," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(2), pages 434-40, July.
    3. Ingela Alger & Ching-to Albert Ma, 2001. "Moral Hazard, Insurance, and Some Collusion," Boston College Working Papers in Economics 496, Boston College Department of Economics.
    4. Svensson, Jakob, 2002. "Who Must Pay Bribes and How Much? Evidence from a cross-section of firms," Seminar Papers 713, Stockholm University, Institute for International Economic Studies.
    5. A. Mitchell Polinsky & Steven Shavell, 1999. "Corruption and Optimal Law Enforcement," NBER Working Papers 6945, National Bureau of Economic Research, Inc.
    6. Acemoglu, D. & Verdier, T., 1997. "The Choice between Market Failures and Corruption," DELTA Working Papers 97-06, DELTA (Ecole normale supérieure).
    7. Alberto Motta, 2009. "Ex-ante and Ex-post Corruption," "Marco Fanno" Working Papers 0094, Dipartimento di Scienze Economiche "Marco Fanno".
    8. Abbink, Klaus, 2004. "Staff rotation as an anti-corruption policy: an experimental study," European Journal of Political Economy, Elsevier, vol. 20(4), pages 887-906, November.
    9. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
    10. Guriev, Sergei, 2003. "Red Tape and Corruption," CEPR Discussion Papers 3972, C.E.P.R. Discussion Papers.
    11. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
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    Cited by:
    1. Michael Dietrich & Jolian McHardy & Abhijit Sharma, 2012. "Firm Corruption in the Presence of an Auditor," Working Paper Series 20_12, The Rimini Centre for Economic Analysis.

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