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Optimal Enforcement Policies Under the Threat of Collusion and Extortion

  • Ajit Mishra

We consider a model of enforcement where the Principal relies on the Supervisor for information on the Agents. We argue that optimal policies must consider both collusion and extortion possibilities. Both collusion and extortion can be prevented by mechanisms resembling appeals process. However, if appeals involve a net cost for the agents, then optimal enforcement policy may involve over-enforcement or under-enforcement.

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File URL: http://www.dundee.ac.uk/media/dundeewebsite/economicstudies/documents/discussion/DDPE_184.pdf
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Paper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 184.

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Length: 23 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:dun:dpaper:184
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  1. Hindriks, J. & Keen, M. & Muthoo, A., 1998. "Corruption, Extortion and Evasion," Discussion Papers 9809, Exeter University, Department of Economics.
  2. Mookherjee, Dilip & Png, I P L, 1994. "Marginal Deterrence in Enforcement of Law," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 1039-66, October.
  3. Laffont & Martimort, 1997. "Collusion under asymmetric information," Working Papers 152574, Institut National de la Recherche Agronomique, France.
  4. Marjit, Sugata & Mukherjee, Vivekananda & Mukherjee, Arijit, 2000. "Harassment, corruption and tax policy," European Journal of Political Economy, Elsevier, vol. 16(1), pages 75-94, March.
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