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Preemptive collusion among corruptible law enforcers

  • Samuel, Andrew
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    This paper considers collusion between a supervisor and an agent within a Principal-Supervisor-Agent model. Other papers consider the possibility of collusion after the supervisor has exerted costly effort to obtain hard ("verifiable") evidence regarding the agent's actions, information which, if reported would result in the agent being fined with a certain probability. That is, collusion occurs because the supervisor may accept a bribe in exchange for hiding the information he has obtained. This paper allows the supervisor and the agent to enter into a collusive contract either before or after the supervisor has exerted effort to find verifiable information regarding the agent's actions. The former type of collusion, which occurs after the supervisor has exerted effort, entails ex-post corruption, while the latter, which occurs before the supervisor has exerted effort, entails preemptive corruption. This paper shows that although raising the supervisor's reward discourages ex-post corruption, it can simultaneously encourage preemptive corruption. Hence, raising the supervisor's reward will not always discourage collusion. This result further implies that though privatizing law enforcement can always be used to eliminate ex-post corruption, it cannot be used to eliminate preemptive corruption. Furthermore, when compared to ex-post collusion, an equilibrium without corruption is always socially preferred. However, when compared to preemptive collusion, an equilibrium without corruption may not always be socially preferred.

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    File URL: http://www.sciencedirect.com/science/article/B6V8F-4W6Y7W8-3/2/dd8cb6eb2df6ff20b6bd1f20c03f69b3
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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 71 (2009)
    Issue (Month): 2 (August)
    Pages: 441-450

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    Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:441-450
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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    1. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
    2. Jakob Svensson, 2003. "Who Must Pay Bribes And How Much? Evidence From A Cross Section Of Firms," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 207-230, February.
    3. Thierry Verdier & Daron Acemoglu, 2000. "The Choice between Market Failures and Corruption," American Economic Review, American Economic Association, vol. 90(1), pages 194-211, March.
    4. Ching-to Albert Ma & Ingela Alger, 1999. "Moral Hazard, Insurance and Some Collusion," FMG Discussion Papers dp318, Financial Markets Group.
    5. Guriev, Sergei, 2004. "Red tape and corruption," Journal of Development Economics, Elsevier, vol. 73(2), pages 489-504, April.
    6. Baliga, Sandeep, 1999. "Monitoring and Collusion with "Soft" Information," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(2), pages 434-40, July.
    7. 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.
    8. 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.
    9. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    10. Abbink, Klaus, 2004. "Staff rotation as an anti-corruption policy: an experimental study," European Journal of Political Economy, Elsevier, vol. 20(4), pages 887-906, November.
    11. Alberto Motta, 2009. "Ex-ante and Ex-post Corruption," "Marco Fanno" Working Papers 0094, Dipartimento di Scienze Economiche "Marco Fanno".
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