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Beaten by bribery: Why not blow the whistle?

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Author Info
Tina Søreide

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Abstract

A recent business survey in Norway reveals that firms rarely react to corruption, even when they have lost important contracts as a result. This disinclination to take action is explored in the light of market structures, business efficiency, judicial institutions and political corruption. The paper develops a theory about how these four variables deter firms from reacting against corruption, and, in particular, how the potential for collusion reinforces the incentives to remain silent. Considered separately, each of the factors are unable to explain the low frequency of anti-corruption reactions between firms. Considered in combination, however, the various impediments suggest a more complete explanation: When conditions in market structure suggest that the best response would be to take action, political conditions may favour inaction. When a potential whistle-blower expects support from local politicians or legal institutions, the given offender may be impervious to sanctions; its role in the market will not be altered by the given case. The sum of precondition for action suggests that firms rarely react against corruption. JEL L10, K42

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Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number WP 2006: 5.

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Date of creation: 2006
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Handle: RePEc:chm:wpaper:wp2006-5

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Related research
Keywords: Corruption Whistleblowing Industrial organization Collusion JEL L10; K42;

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  1. Friedman, James W. & Thisse, Jacques-Francis, 1994. "Sustainable collusion in oligopoly with free entry," European Economic Review, Elsevier, vol. 38(2), pages 271-283, February. [Downloadable!] (restricted)
    Other versions:
  2. Schmalensee, Richard, 1987. "Competitive advantage and collusive optima," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 351-367. [Downloadable!] (restricted)
  3. Bjorvatn, Kjetil & Soreide, Tina, 2005. "Corruption and privatization," European Journal of Political Economy, Elsevier, vol. 21(4), pages 903-914, December. [Downloadable!] (restricted)
  4. Kaufmann, Daniel & Vicente, Pedro C., 2005. "Legal Corruption," MPRA Paper 8186, University Library of Munich, Germany. [Downloadable!]
  5. Bergstrom, Theodore C & Varian, Hal R, 1985. "When Are Nash Equilibria Independent of the Distribution of Agents' Characteristics?," Review of Economic Studies, Blackwell Publishing, vol. 52(4), pages 715-18, October. [Downloadable!] (restricted)
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  6. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers 186, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  7. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November. [Downloadable!] (restricted)
  8. Shleifer, Andrei & Vishny, Robert W, 1993. "Corruption," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 599-617, August. [Downloadable!] (restricted)
    Other versions:
    • Andrei Shleifer & Robert W. Vishny, 1993. "Corruption," NBER Working Papers 4372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Ariane Lambert-Mogiliansky & Konstantin Sonin, 2003. "Corruption and Collusion in Procurement Tenders," Working Papers w0036, Center for Economic and Financial Research (CEFIR). [Downloadable!]
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