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Strategic Analysis of Influence Peddling

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  • Majumdar, Mukul

    (Cornell University)

  • Yoo, Seung Han

    (Nanyang Technological University)

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    Abstract

    This paper analyzes "Influence Peddling" with interaction between human capital transfer and collusion-building aspects in a model, in which each government official regulates multiple firms simultaneously. We show that (i) there exists an "optimal" division rule for collusion between a sequence of "qualified" regulators and a firm; (ii) as the regulators increasingly benefit from the collusion, they strictly decrease regulation rates for the firm under collusion while strictly increasing regulation rates for a firm not under collusion; and (iii) post-government-employment restrictions are not "effective" policies, and an alternative policy can be suggested.

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    Bibliographic Info

    Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 11-04.

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    Date of creation: Jul 2011
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    Handle: RePEc:ecl:corcae:11-04

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    1. Kimberly Ann Elliott, 1997. "Corruption and the Global Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 12.
    2. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
    3. Lambert-Mogiliansky, Ariane & Majumdar, Mukul & Radner, Roy, 2007. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," Journal of Development Economics, Elsevier, vol. 83(2), pages 351-367, July.
    4. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
    5. Drew Fudenberg & David Kreps & Eric Maskin, 1988. "Repeated Games with Long-Run and Short-Run Players," Working papers 474, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Eckert, Ross D, 1981. "The Life Cycle of Regulatory Commissioners," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 113-20, April.
    7. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
    8. John K.-H Quah, 2007. "The Comparative Statics of Constrained Optimization Problems," Econometrica, Econometric Society, vol. 75(2), pages 401-431, 03.
    9. Martimort, David, 1999. "The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs," Review of Economic Studies, Wiley Blackwell, vol. 66(4), pages 929-47, October.
    10. Yeon-Koo Che, 1995. "Revolving Doors and the Optimal Tolerance for Agency Collusion," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 378-397, Autumn.
    11. Fudenberg, Drew & Tirole, Jean, 1991. "Perfect Bayesian equilibrium and sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 53(2), pages 236-260, April.
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