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Corruption, Extortion, and the Boundaries of the Law

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Author Info
Svetlana Andrianova () (University of Leiceter)
Nicolas Melissas () (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

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Abstract

We 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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File URL: http://ftp.itam.mx/pub/academico/inves/melissas/06-05.pdf
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File Function: First version, 1996
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Publisher Info
Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0605.

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Length: 32 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:cie:wpaper:0605

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Related research
Keywords: Moral Hazard; Collusion; Non-contractive Output; Rewards and Punishments;

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mishra, Ajit, 2002. "Hierarchies, incentives and collusion in a model of enforcement," Journal of Economic Behavior & Organization, Elsevier, vol. 47(2), pages 165-178, February. [Downloadable!] (restricted)
  2. Kessler, Anke S., 2000. "On Monitoring and Collusion in Hierarchies," Journal of Economic Theory, Elsevier, vol. 91(2), pages 280-291, April. [Downloadable!] (restricted)
  3. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August. [Downloadable!] (restricted)
  4. Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2003. "Organized Crime, Corruption and Punishment," Working Paper Series 600, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  5. Hindriks, J. & Keen, M. & Muthoo, A., 1996. "Corruption, Extortion and Evasion," Papers 179, Notre-Dame de la Paix, Sciences Economiques et Sociales.
    Other versions:
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