Endogenising Detection in an Asymmetric Penalties Corruption Game
AbstractWe 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 InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 12/20.
Date of creation: Jul 2012
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Inspection game; Corruption; Asymmetric penalties; Endogenising detection;
Find related papers by JEL classification:
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- H00 - Public Economics - - General - - - General
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-29 (All new papers)
- NEP-CTA-2012-07-29 (Contract Theory & Applications)
- NEP-GTH-2012-07-29 (Game Theory)
- NEP-LAW-2012-07-29 (Law & Economics)
- NEP-MIC-2012-07-29 (Microeconomics)
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