Beneficial Collusion in Corruption Control: The Case of Nonmonetary Penalties
AbstractWe analyze a corruption model where a principal seeks to control an agent’s corruption by supplementing a costless noncollusive outside detector such as the media with a collusive internal supervisor. The principal’s objective is to minimize the overall costs, made up of enforcement costs and social costs of corruption. If the penalties on the corrupt agent and a failing supervisor are nonmonetary in nature and yet the two parties can engage in monetary side-transfers, the principal may stand to benefit by allowing supervisor-agent collusion. This benefit may even prompt the principal to actively encourage collusion by hiring a dishonest supervisor in strict preference over an honest supervisor.
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Bibliographic InfoPaper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 0205.
Length: 33 pages
Date of creation: Apr 2005
Date of revision:
Corruption; monitoring; collusion; bounty hunter mechanism;
Other versions of this item:
- Bac, Mehmet & Bag, Parimal Kanti, 2006. "Beneficial collusion in corruption control: The case of nonmonetary penalties," Journal of Development Economics, Elsevier, vol. 81(2), pages 478-499, December.
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-LAW-2006-01-27 (Law & Economics)
- NEP-REG-2006-02-08 (Regulation)
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