Bribery and temptation: More red tape or more discretion?

This paper studies the moral dilemma of bribery in the presence of official discretion. The moral dilemma is framed as a dynamic choice problem in which an official’s present biased temptation preferences that value bribery conflict with commitment preferences that place more value on honesty. The tension between temptation and commitment becomes salient in the presence of the official’s discretionary power. More discretion allows the official to lower red-tape which is socially beneficial, but it also makes bribery more tempting thereby making commitment to honesty more costly. Accordingly, a morally committed bureaucrat may choose less discretion (which generates more red-tape) as a remedy to avoid being tempted by bribery. Whereas, the welfare maximizing policy will often impose high discretion, which generates psychic temptation costs on honest officials.