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Endogenising Detection in an Asymmetric Penalties Corruption Game

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  • Dominic Spengler

Abstract

We construct a one-shot corruption game with three players, a briber who can decide to bribe or not, an official who can reciprocate or not and an inspector who can decide to inspect or not. We employ four penalties that can be distributed asymmetrically, making it possible to punish bribing and bribe-taking as well as reciprocating and accepting considerations to different degrees. Penalties apply if corruption is detected. The probability of detection is endogenised, as it depends on inspection. The model differs from other inspection games in that the offence (corruption) can only be completed in a joint effort between two of the players. This leads to surprising results, especially in conjunction with asymmetric penalties. First, in contrast to Tsebelis' counterintuitive results, we find confirmed that with endogenous detection, higher penalties do reduce the overall rate of offence. Second, this result holds only if the penalty for reciprocating on the official is raised. Surprisingly, and unlike other asymmetric penalty prescriptions in the corruption literature, higher penalties on on the briber have the opposite effect. They may reduce the probability of bribery, but they also increase the probability of reciprocation to the extent that the overall probability of reciprocated bribery is increased.

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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 12/20.

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Date of creation: Jul 2012
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Handle: RePEc:yor:yorken:12/20

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Keywords: Inspection game; Corruption; Asymmetric penalties; Endogenising detection;

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  1. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  2. Christoph Engel & Sebastian Goerg & Gaoneng Yu, 2012. "Symmetric vs. Asymmetric Punishment Regimes for Bribery," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2012_01, Max Planck Institute for Research on Collective Goods, revised May 2013.
  3. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages F632-F652, November.
  4. Basu, Kaushik, 2011. "Why, for a Class of Bribes, the Act of Giving a Bribe should be Treated as Legal," MPRA Paper 50335, University Library of Munich, Germany.
  5. Pradiptyo Rimawan, 2007. "Does Punishment Matter? A Refinement of the Inspection Game," Review of Law & Economics, De Gruyter, vol. 3(2), pages 197-219, August.
  6. Marjit, Sugata & Shi, Heling, 1998. "On controlling crime with corrupt officials," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 163-172, January.
  7. Luciano Andreozzi, 2004. "Rewarding Policemen Increases Crime. Another Surprising Result from the Inspection Game," Public Choice, Springer, vol. 121(1), pages 69-82, October.
  8. Lambsdorff, Johann & Nell, Mathias, 2007. "Fighting corruption with asymmetric penalties and leniency," Center for European, Governance and Economic Development Research Discussion Papers 59, University of Goettingen, Department of Economics.
  9. Georges Dionne & Florence Giuliano & Pierre Picard, 2005. "Optimal Auditing with Scoring Theory and Application to Insurance Fraud," Working Papers hal-00243026, HAL.
  10. Tim Friehe, 2008. "Correlated payoffs in the inspection game: some theory and an application to corruption," Public Choice, Springer, vol. 137(1), pages 127-143, October.
  11. Lambsdorff, Johann & Nell, Mathias, 2007. "Fighting corruption with asymmetric penalties and leniency," Center for European, Governance and Economic Development Research Discussion Papers 59, University of Goettingen, Department of Economics.
  12. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
  13. Jain, Arvind K, 2001. " Corruption: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 71-121, February.
  14. Cox, Gary W, 1994. " A Note on Crime and Punishment," Public Choice, Springer, vol. 78(1), pages 115-24, January.
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