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Bargaining for bribes under uncertainty

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  • Danila Serra
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    Abstract

    A corrupt transaction is often the result of bargaining between the parties involved.� This paper models bribery as a double auction where a private citizen and a public official strategically interact as the potential buyer and the potential seller of a corrupt service.� Individuals differ in the internalized moral cost generated by corruption, and may have only imperfect information on others' moral cost, i.e. their "corruptibility".� This paper investigates the role that imperfect information with respect to the "corruptibility" of one's potential partner in corruption plays in his or her propensity to engage in bribery, and, consequently, the equilibrium level of corruption in a society.� We find that corruption is lower when potential bribers and potential bribees are uncertain regarding each other's "corruptibility".� This paper provides therefore theoretical support to anti-corruption strategies, such as staff rotation in public offices, aimed at decreasing the social closeness of bribers and bribees.

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    Bibliographic Info

    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2008-22.

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    Date of creation: 01 Sep 2008
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    Handle: RePEc:oxf:wpaper:csae-wps/2008-22

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    Related research

    Keywords: Bribery; Moral Cost; Double Auction; Imperfect Information; Multiple Equilibria;

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    1. Abbink, Klaus, 1999. "Staff Rotation: A Powerful Weapon Against Corruption?," Discussion Paper Serie B 460, University of Bonn, Germany.
    2. Svensson, Jakob, 2000. "Who must pay bribes and how much? Evidence from a cross-section of firms," Policy Research Working Paper Series 2486, The World Bank.
    3. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
    4. Lui, Francis T., 1986. "A dynamic model of corruption deterrence," Journal of Public Economics, Elsevier, vol. 31(2), pages 215-236, November.
    5. Tirole, Jean, 1996. "A Theory of Collective Reputations (with Applications to the Persistence of Corruption and to Firm Quality)," Review of Economic Studies, Wiley Blackwell, vol. 63(1), pages 1-22, January.
    6. Bisin, A. & Verdier, T., 1997. "The Economics of Cultural Transmission and the Dynamics of Preferences," DELTA Working Papers 97-03, DELTA (Ecole normale supérieure).
    7. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May.
    8. George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers 118, Board of Governors of the Federal Reserve System (U.S.).
    9. Cadot, Olivier, 1987. "Corruption as a gamble," Journal of Public Economics, Elsevier, vol. 33(2), pages 223-244, July.
    10. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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