Indirect Monitoring and Optimal Corruption
AbstractCorruption is a widespread phenomenon around the world. Yet, models of hierarchical agency relationships tend not to predict collusion. The paper demonstrates that allowing collusion may be optimal if the principal cannot commit to an incentive scheme once and for all. The optimal extent of corruption depends on the efficacy of the legal system. It must be risky for the guilty parties to engage in corruption in order to make it worthwile curbing it.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 52.
Length: 44 pages
Date of creation: Apr 1995
Date of revision:
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Commitment; collusion; renegotiation;
Find related papers by JEL classification:
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- 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
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- Osipian, Ararat, 2008. "The World is Flat: Modeling Educators’ Misconduct with Cellular Automata," MPRA Paper 7592, University Library of Munich, Germany.
- Bowles, Roger & Garoupa, Nuno, 1997. "Casual police corruption and the economics of crime," International Review of Law and Economics, Elsevier, vol. 17(1), pages 75-87, March.
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