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Beaten by bribery: Why not blow the whistle?

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  • Tina Søreide

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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Bibliographic Info

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

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

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

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  1. Ariane Lambert-Mogiliansky & Konstantin Sonin, 2006. "Collusive Market Sharing and Corruption in Procurement," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 15(4), pages 883-908, December.
  2. Bergstrom, Theodore C & Varian, Hal R, 1985. "When Are Nash Equilibria Independent of the Distribution of Agents' Characteristics?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 52(4), pages 715-18, October.
  3. Friedman, James W. & Thisse, Jacques-Francis, 1994. "Sustainable collusion in oligopoly with free entry," European Economic Review, Elsevier, Elsevier, vol. 38(2), pages 271-283, February.
  4. Bjorvatn, Kjetil & Soreide, Tina, 2005. "Corruption and privatization," European Journal of Political Economy, Elsevier, vol. 21(4), pages 903-914, December.
  5. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 186, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Kaufmann, Daniel & Vicente, Pedro C., 2005. "Legal Corruption," MPRA Paper 8186, University Library of Munich, Germany.
  7. Schmalensee, Richard, 1987. "Competitive advantage and collusive optima," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 5(4), pages 351-367.
  8. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(4), pages 995-1025, November.
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Cited by:
  1. Villena, Mauricio G. & Villena, Marcelo J., 2010. "On the economics of whistle-blowing behavior: the role of incentives," MPRA Paper 35917, University Library of Munich, Germany, revised 24 Mar 2010.
  2. Frédéric Boehm & Johann Graf Lambsdorff, 2009. "Corrupción y anticorrupción: una perspectiva neo-institucional," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, Universidad Externado de Colombia - Facultad de Economía, vol. 11(21), pages 45-72, July-Dece.

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