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Hierarchies, Incentives And Collusion In Model Of Enforcement

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Abstract

This paper considers a model of enforcement with corruptible enforcers in a principal-supervisor-agent framework. We look at how different reward and penalty schemes lead to different outcomes (agent's compliance) by affecting the supervisor's choice of effort and honesty. It is shown that the organizational structure of the agency also influences the effort-honesty choice of the supervisors. A vertical hierarchical structure (with. corrupt supervisors monitoring another corrupt supervisor) can be optimal in certain cases. Likewise, an arrangement where more than one supervisor monitor the agent, can also be optimal. The organizational issues assume importance when there are constraints on the size of rewards and penalties
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  • A Mishra, "undated". "Hierarchies, Incentives And Collusion In Model Of Enforcement," Dundee Discussion Papers in Economics 067, Economic Studies, University of Dundee.
  • Handle: RePEc:dun:dpaper:067
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    12. repec:exe:wpaper:98/09 is not listed on IDEAS
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    Cited by:

    1. Gorkem Celik & Serdar Sayan, 2008. "On the optimality of nonmaximal fines in the presence of corruptible law enforcers," Review of Economic Design, Springer;Society for Economic Design, vol. 12(3), pages 209-227, September.
    2. Jin-Li Hu & Chung-Huang Huang & Wei-Kai Chu, 2004. "Bribery, hierarchical government, and incomplete environmental enforcement," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 6(3), pages 177-196, September.
    3. Makowsky, Michael D. & Wang, Siyu, 2018. "Embezzlement, whistleblowing, and organizational architecture: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 147(C), pages 58-75.
    4. Bibhas Saha & Trivikraman Thampy, 2004. "Corruption, Default and Optimal Credit in Welfare Programs," Microeconomics Working Papers 22392, East Asian Bureau of Economic Research.
    5. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2009. "Why is corruption less harmful in some countries than in others?," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 797-810, December.
    6. Giovanni Facchini & Cecilia Testa, 2016. "Corruption and bicameral reforms," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(2), pages 387-411, August.
    7. 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.
    8. Ajit Mishra, 2004. "Corruption: A Review," Dundee Discussion Papers in Economics 170, Economic Studies, University of Dundee.
    9. Nicolas Melissas, 2009. "Corruption, Extortion, and the Boundaries of the Law," Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 442-471, October.
    10. Saha, Bibhas & Thampy, Trivikraman, 2006. "Extractive bribe and default in subsidized credit programs," Journal of Economic Behavior & Organization, Elsevier, vol. 60(2), pages 182-204, June.
    11. Keith Blackburn & Kyriakos C. Neanidis & M. Emranul Haque, 2008. "Comparing Seasonal Forecasts of Industrial Production," Centre for Growth and Business Cycle Research Discussion Paper Series 103, Economics, The University of Manchester.
    12. Bag, Parimal Kanti, 1997. "Controlling Corruption in Hierarchies," Journal of Comparative Economics, Elsevier, vol. 25(3), pages 322-344, December.
    13. Burlando, Alfredo & Motta, Alberto, 2016. "Legalize, tax, and deter: Optimal enforcement policies for corruptible officials," Journal of Development Economics, Elsevier, vol. 118(C), pages 207-215.
    14. Xiang, Wang, 2020. "Who will watch the watchers? On optimal monitoring networks," Journal of Economic Theory, Elsevier, vol. 187(C).
    15. Ajit Mishra, 2004. "Incentives, Norms and the Persistence of Corruption," Dundee Discussion Papers in Economics 161, Economic Studies, University of Dundee.
    16. Valerie Rosenblatt, 2012. "Hierarchies, Power Inequalities, and Organizational Corruption," Journal of Business Ethics, Springer, vol. 111(2), pages 237-251, December.
    17. Nicolas Jacquemet, 2005. "La corruption comme une imbrication de contrats : Une revue de la littérature microéconomique," Working Papers 2005-29, Center for Research in Economics and Statistics.
    18. Hong, Fuhai & Yin, Zhendong, 2020. "Collusion, extortion and the government’s organizational structure," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 1-23.
    19. Keith Blackburn & Kyriakos C. Neanidis & M. Emranul Haque, 2008. "Corruption, Seigniorage and Growth: Theory and Evidence," CESifo Working Paper Series 2354, CESifo.
    20. Kaushik Basu, 2016. "Beyond the Invisible Hand: Groundwork for a New Economics," Economics Books, Princeton University Press, edition 1, number 9299, April.
    21. Cracau, Daniel & Franz, Benjamin, 2013. "Bonus payments as an anti-corruption instrument: A theoretical approach," Economics Letters, Elsevier, vol. 120(1), pages 1-4.
    22. Celik, Gorkem & Sayan, Serdar, 2005. "To Give In or Not To Give In To Bribery? Setting the Optimal Fines for Violations of Rules when the Enforcers are Likely to Ask for Bribes," Microeconomics.ca working papers celik-05-08-03-12-50-26, Vancouver School of Economics, revised 06 Aug 2008.

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