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Rationing by Waiting, Opportunity Costs of Waiting and Bribery

  • Praveen Kulshreshtha

    (Economics Area, Indian Institute of Management, Vastrapur, Ahmedabad 38015, India)

This paper analyzes the relationship between opportunity costs of waiting and bribery in rationing by waiting situations. Assuming that a uniform waiting time clears the market for any given bribe and the bureaucrat chooses a bribe to maximize profit, the market equilibrium is characterized in terms of individual valuations of the good and opportunity costs of waiting. If individual valuations take discrete values and opportunity costs of waiting are uniformly distributed then in an equilibrium individuals with low costs of waiting choose to wait while those with high opportunity costs pay the bribe. However if valuations and costs of waiting are uniformly distributed, bribery is pervasive in equilibrium (i.e. all units are sold via bribery). Moreover, an increase in bribery does not necessarily imply an improvement in allocational efficiency.

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Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

Volume (Year): 38 (2003)
Issue (Month): 1 (January)
Pages: 59-75

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Handle: RePEc:dse:indecr:v:38:y:2003:i:1:p:59-75
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