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Corruption in procurement and public purchase

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  • Auriol, Emmanuelle

Abstract

The paper studies the impact of corruption threat in procurement an dpublic purchases. It explores the consequences of the unobservability of people integrity and considers the problem of both capture and extortion. It shows that extortion is not fight against because it is not harmful to the principal, contrary to capture which is costly. This distinction implies that when corruptibility increases among the population the optimal answer of the organization is to shift from a capture regime to an extortion regime.
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Suggested Citation

  • Auriol, Emmanuelle, 2006. "Corruption in procurement and public purchase," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 867-885, September.
  • Handle: RePEc:eee:indorg:v:24:y:2006:i:5:p:867-885
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    References listed on IDEAS

    as
    1. Kofman, Fred & Lawarree, Jacques, 1996. "A prisoner's dilemma model of collusion deterrence," Journal of Public Economics, Elsevier, pages 117-136.
    2. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
    3. Domberger, Simon & Hall, Christine & Li, Eric Ah Lik, 1995. "The Determinants of Price and Quality in Competitively Tendered Contracts," Economic Journal, Royal Economic Society, vol. 105(433), pages 1454-1470, November.
    4. Bac, Mehmet, 1996. "Corruption and Supervision Costs in Hierarchies," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 99-118, April.
    5. Kofman, Fred & Lawarree, Jacques, 1993. "Collusion in Hierarchical Agency," Econometrica, Econometric Society, pages 629-656.
    6. Auriol, Emmanuelle & Laffont, Jean-Jacques, 1992. "Regulation by Duopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(3), pages 507-533, Fall.
    7. Hindriks, Jean & Keen, Michael & Muthoo, Abhinay, 1999. "Corruption, extortion and evasion," Journal of Public Economics, Elsevier, vol. 74(3), pages 395-430, December.
    8. Hoekman, Bernard, 1998. "Using International Institutions to Improve Public Procurement," World Bank Research Observer, World Bank Group, vol. 13(2), pages 249-269, August.
    9. Konrad, Kai A. & Skaperdas, Stergios, 1997. "Credible threats in extortion," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 23-39, May.
    10. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Roberto Burguet & Juan José Ganuza & José Garcia Montalvo, 2016. "The microeconomics of corruption. A review of thirty years of research," Economics Working Papers 1525, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Reyes Calderón & José Luis à lvarez Arce, 2007. "Corruption, Complexity and Governance," Faculty Working Papers 11/07, School of Economics and Business Administration, University of Navarra.
    3. Raventós, Pedro & Zolezzi, Sandro, 2015. "Electronic tendering of pharmaceuticals and medical devices in Chile," Journal of Business Research, Elsevier, vol. 68(12), pages 2569-2578.
    4. Auriol, Emmanuelle & Søreide, Tina, 2017. "An economic analysis of debarment," International Review of Law and Economics, Elsevier, vol. 50(C), pages 36-49.
    5. David Martimort & Stephane Straub, 2006. "Privatization and Changes in Corruption Patterns: The Roots of Public Discontent," ESE Discussion Papers 147, Edinburgh School of Economics, University of Edinburgh.
    6. Martimort, David & Straub, Stéphane, 2009. "Infrastructure privatization and changes in corruption patterns: The roots of public discontent," Journal of Development Economics, Elsevier, vol. 90(1), pages 69-84, September.
    7. Auriol, Emmanuelle & Straub, Stéphane & Flochel, Thomas, 2016. "Public Procurement and Rent-Seeking: The Case of Paraguay," World Development, Elsevier, vol. 77(C), pages 395-407.
    8. C. Guccio & G. Pignataro & I. Rizzo, 2012. "Determinants of adaptation costs in procurement: an empirical estimation on Italian public works contracts," Applied Economics, Taylor & Francis Journals, vol. 44(15), pages 1891-1909, May.
    9. Hindriks, Jean & Keen, Michael & Muthoo, Abhinay, 1999. "Corruption, extortion and evasion," Journal of Public Economics, Elsevier, pages 395-430.
    10. Emmanuelle Auriol & Stéphane Straub, 2011. "Privatization of Rent-Generating Industries and Corruption," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 7 Edward Elgar Publishing.
    11. Oriana Bandiera & Andrea Prat & Tommaso Valletti, 2009. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," American Economic Review, American Economic Association, vol. 99(4), pages 1278-1308, September.
    12. Long, Ngo Van & Stähler, Frank, 2009. "A contest model of liberalizing government procurements," European Journal of Political Economy, Elsevier, vol. 25(4), pages 479-488, December.
    13. Antonio Estache & Renaud Foucart, 2016. "Corruption and Incompetence in Public Procurement," Working Papers ECARES ECARES 2016-05, ULB -- Universite Libre de Bruxelles.
    14. Estache, Antonio & Iimi, Atsushi, 2008. "Procurement efficiency for infrastructure development and financial needs reassessed," Policy Research Working Paper Series 4662, The World Bank.
    15. Sean Lewis-Faupel & Yusuf Neggers & Benjamin A. Olken & Rohini Pande, 2014. "Can Electronic Procurement Improve Infrastructure Provision? Evidence From Public Works in India and Indonesia," NBER Working Papers 20344, National Bureau of Economic Research, Inc.
    16. Ufere, Nnaoke & Perelli, Sheri & Boland, Richard & Carlsson, Bo, 2012. "Merchants of Corruption: How Entrepreneurs Manufacture and Supply Bribes," World Development, Elsevier, vol. 40(12), pages 2440-2453.
    17. Olga Chiappinelli, 2016. "Political Corruption in the Execution of Public Contracts," Discussion Papers of DIW Berlin 1607, DIW Berlin, German Institute for Economic Research.
    18. Serena Brianzoni & Raffaella Coppier & Elisabetta Michetti, 2012. "A Growth Model with Corruption in Public Procurement: Equilibria and Policy Implications," Working Papers 68-2012, Macerata University, Department of Finance and Economic Sciences, revised Sep 2015.
    19. Anna D’Souza & Daniel Kaufmann, 2013. "Who bribes in public contracting and why: worldwide evidence from firms," Economics of Governance, Springer, vol. 14(4), pages 333-367, November.
    20. Charles Kenny, William Savedoff, 2013. "Can Results-Based Payments Reduce Corruption?-Working Paper 345," Working Papers 345, Center for Global Development.
    21. Chiappinelli, Olga, 2016. "Political corruption in the execution of public contracts," MPRA Paper 73487, University Library of Munich, Germany.
    22. repec:eee:ecosys:v:41:y:2017:i:1:p:52-67 is not listed on IDEAS
    23. Yun Sungho, 2012. "Costs of Engaging in Corruption: Equilibrium with Extortion and Framing," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-32, December.
    24. Huang, He & Li, Zhipeng, 2015. "Procurement auctions with ex-ante endogenous bribery," Economic Modelling, Elsevier, vol. 47(C), pages 111-117.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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