Corruption, Extortion, and the Boundaries of the Law
AbstractWe consider a set-up in which a principal must decide whether or not to legalise a socially undesirable activity. The law is enforced by a monitor who may be bribed to conceal evidence of the offence and who may also engage in extortionary practices. The principal only declares the activity illegal if the activity if "very harmful" and if the private benefit (received by the agent if she breaks the law) is "high". We present comparative static results and highlight policy implications.
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Bibliographic InfoPaper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0605.
Length: 32 pages
Date of creation: Sep 2006
Date of revision:
Moral Hazard; Collusion; Non-contractive Output; Rewards and Punishments;
Other versions of this item:
- Nicolas Melissas, 2009. "Corruption, Extortion, and the Boundaries of the Law," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(2), pages 442-471, October.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-28 (All new papers)
- NEP-LAW-2006-10-28 (Law & Economics)
- NEP-REG-2006-10-28 (Regulation)
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