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Corruption-free scheme of entering into contract: mathematical model

Author

Listed:
  • Oleg Malafeyev
  • Olga Koroleva
  • Dmitriy Prusskiy
  • Olga Zenovich

Abstract

The main purpose of this paper is to formalize the modelling process, analysis and mathematical definition of corruption when entering into a contract between principal agent and producers. The formulation of the problem and the definition of concepts for the general case are considered. For definiteness, all calculations and formulas are given for the case of three producers, one principal agent and one intermediary. Economic analysis of corruption allowed building a mathematical model of interaction between agents. Financial resources distribution problem in a contract with a corrupted intermediary is considered.Then proposed conditions for corruption emergence and its possible consequences. Optimal non-corruption schemes of financial resources distribution in a contract are formed, when principal agent's choice is limited first only by asymmetrical information and then also by external influences.Numerical examples suggesting optimal corruption-free agents' behaviour are presented.

Suggested Citation

  • Oleg Malafeyev & Olga Koroleva & Dmitriy Prusskiy & Olga Zenovich, 2018. "Corruption-free scheme of entering into contract: mathematical model," Papers 1804.02333, arXiv.org, revised Apr 2018.
    • Handle: RePEc:arx:papers:1804.02333
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    References listed on IDEAS

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    1. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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    3. Vassili N Kolokoltsov & Oleg A Malafeyev, 2010. "Understanding Game Theory:Introduction to the Analysis of Many Agent Systems with Competition and Cooperation," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 7564, February.
    4. Shang-Jin Wei & Yi Wu, 2002. "Negative Alchemy? Corruption, Composition of Capital Flows, and Currency Crises," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 461-506, National Bureau of Economic Research, Inc.
    5. Lambert-Mogiliansky, Ariane, 1995. "Indirect Monitoring and Optimal Corruption," SSE/EFI Working Paper Series in Economics and Finance 52, Stockholm School of Economics.
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