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Strategic analysis of petty corruption with an intermediary

Author

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  • Ariane Lambert-Mogiliansky
  • Mukul Majumdar
  • Roy Radner

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Abstract

This notes reports part of a larger study of "petty corruption" by government bureaucrats in the process of approving new business projects. Each bureaucrat may demand a bribe as a condition for approval. Entrepreneurs use the services of an intermediary who, for a fee, undertakes to obtain all the required approvals. In a dynamic game model we investigate (1) the multiplicity of equilibria, (2) the equilibria that are "socially efficient", and (3) the equilibria that maximize the total expected bureaucrat's bribe income. We compare these results with those for the case in which entrepreneurs apply directly to the bureaucrats.
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Suggested Citation

  • Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2009. "Strategic analysis of petty corruption with an intermediary," Review of Economic Design, Springer;Society for Economic Design, vol. 13(1), pages 45-57, April.
  • Handle: RePEc:spr:reecde:v:13:y:2009:i:1:p:45-57 DOI: 10.1007/s10058-008-0068-1
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    References listed on IDEAS

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    1. Leonid Hurwicz, 2008. "But Who Will Guard the Guardians?," American Economic Review, American Economic Association, pages 577-585.
    2. Lambert-Mogiliansky, Ariane & Majumdar, Mukul & Radner, Roy, 2007. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," Journal of Development Economics, Elsevier, pages 351-367.
    3. Lambert-Mogiliansky, Ariane & Majudar, Mukul & Radner, Roy, 2008. "Petty Corruption: A Game-Theoretic Approach," Working Papers 08-09, Cornell University, Center for Analytic Economics.
    4. Gian Luca Clementi, "undated". "Ipos and The Growth of Firms," GSIA Working Papers 2002-E8, Carnegie Mellon University, Tepper School of Business.
    5. Güzin Bayar, 2005. "The role of intermediaries in corruption," Public Choice, Springer, vol. 122(3), pages 277-298, March.
    6. Hasker, Kevin & Okten, Cagla, 2008. "Intermediaries and corruption," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 103-115, July.
    7. Lambsdorff,Johann Graf, 2007. "The Institutional Economics of Corruption and Reform," Cambridge Books, Cambridge University Press, number 9780521872751, December.
    8. Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2008. "Petty corruption: A game-theoretic approach," International Journal of Economic Theory, The International Society for Economic Theory, pages 273-297.
    9. Lambert-Mogiliansky, Ariane & Majumdar, Mukul & Radner, Roy, 2007. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," Journal of Development Economics, Elsevier, pages 351-367.
    10. Leonid Hurwicz, 2008. "But Who Will Guard the Guardians?," American Economic Review, American Economic Association, pages 577-585.
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    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. Graf Lambsdorff, Johann, 2010. "Deterrence and constrained enforcement: Alternative regimes to deal with bribery," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-60-10, University of Passau, Faculty of Business and Economics.
    3. Frédéric Koessler & Ariane Lambert-Mogiliansky, 2012. "Optimal Extortion and Political Risk Insurance," PSE Working Papers halshs-00672963, HAL.
    4. Gautam Bose, 2010. "Aspects of Bureaucratic Corruption," Discussion Papers 2010-14, School of Economics, The University of New South Wales.
    5. Ivanov, A. & Maslova, S., 2014. "Applying modelling in the process of anti-corruption expertise of legal regulation of public procurement," Working Papers 6382, Graduate School of Management, St. Petersburg State University.
    6. repec:ces:ifodic:v:9:y:2011:i:2:p:16132588 is not listed on IDEAS
    7. Emanuela Marrocu & Maria Chiara Di Guardo & Raffaele Paci, 2015. "The effect of local corruption on ownership strategy in cross border mergers and acquisitions," ERSA conference papers ersa15p92, European Regional Science Association.
    8. Ajit Mishra & Andrew Samuel, 2016. "Corruption and hold-up: the role of intermediaries," European Journal of Law and Economics, Springer, vol. 41(3), pages 575-599, June.
    9. Koessler, Frédéric & Lambert-Mogiliansky, Ariane, 2014. "Extortion and political-risk insurance," Journal of Public Economics, Elsevier, pages 144-156.
    10. Ariane Lambert-Mogiliansky, 2011. "Corruption and Collusion: Strategic Complements in Procurement," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 4 Edward Elgar Publishing.
    11. Ivanov, A., 2015. "How to improve effectiveness of anti-corruption expertise: Public procurement case," Working Papers 6433, Graduate School of Management, St. Petersburg State University.
    12. Sheopuri, Anshul & Zemel, Eitan, 2010. "A note on the properties of the optimal solution(s) of the Greed and Regret problem," European Journal of Operational Research, Elsevier, vol. 204(3), pages 690-693, August.
    13. Di Guardo, Maria Chiara & Marrocu, Emanuela & Paci, Raffaele, 2016. "The effect of local corruption on ownership strategy in cross-border mergers and acquisitions," Journal of Business Research, Elsevier, vol. 69(10), pages 4225-4241.
    14. Koessler, Frédéric & Lambert-Mogiliansky, Ariane, 2014. "Extortion and political-risk insurance," Journal of Public Economics, Elsevier, pages 144-156.
    15. Pablo Morales, Jorge Finke, 2015. "Small-World Networks of corruption," REVISTA CIFE, UNIVERSIDAD SANTO TOMÁS, August.

    More about this item

    Keywords

    Petty corruption; Intermediaries; Game-theory; C73; D73; O12;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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