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Strategic analysis of petty corruption with an intermediary

Author

Listed:
  • Ariane Lambert-Mogiliansky

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Mukul Majumdar

    (Economics Department - Cornell University - Cornell University [New York])

  • Roy Radner

    (Stern School of Business - NYU - New York University [New York] - NYU - NYU System)

Abstract

This note 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 of approval. Entrepreneurs use the services of an intermediary who, for a fee, undertakes to obtain all of 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 bureaucrats' bribe income. We compare these results with those for the case in which entrepreneurs apply directly to the bureaucrats.

Suggested Citation

  • Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2009. "Strategic analysis of petty corruption with an intermediary," Post-Print halshs-00754385, HAL.
    • Handle: RePEc:hal:journl:halshs-00754385
    DOI: 10.1007/s10058-008-0068-1
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    References listed on IDEAS

    as
    1. Lambert-Mogiliansky, Ariane & Majumdar, Mukul & Radner, Roy, 2007. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," Journal of Development Economics, Elsevier, vol. 83(2), pages 351-367, July.
    2. 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, vol. 4(2), pages 273-297, June.
    3. Güzin Bayar, 2005. "The role of intermediaries in corruption," Public Choice, Springer, vol. 122(3), pages 277-298, March.
    4. Leonid Hurwicz, 2008. "But Who Will Guard the Guardians?," American Economic Review, American Economic Association, vol. 98(3), pages 577-585, June.
    5. Hasker, Kevin & Okten, Cagla, 2008. "Intermediaries and corruption," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 103-115, July.
    6. Barnett,William A. & Schofield,Norman & Hinich,Melvin (ed.), 1993. "Political Economy: Institutions, Competition and Representation," Cambridge Books, Cambridge University Press, number 9780521428316.
    7. Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2007. "Strategic Analysis of Petty Corruption: Bureaucrats and Entrepreneurs," PSE-Ecole d'économie de Paris (Postprint) halshs-00754220, HAL.
    8. Lambsdorff,Johann Graf, 2007. "The Institutional Economics of Corruption and Reform," Cambridge Books, Cambridge University Press, number 9780521872751.
    Full references (including those not matched with items on IDEAS)

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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. Arvind K. Jain, 2011. "Corruption: Theory, Evidence and Policy," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(02), pages 3-9, July.
    6. Said, Jamaliah & Asry, Salsabila & Rafidi, Marhamah & Obaid, Rawia Rida & Alam, Md. Mahmudul, 2019. "Integrating Religiosity into Fraud Triangle Theory: Empirical Findings from Enforcement Officers," SocArXiv wcyg4, Center for Open Science.
    7. 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.
    8. Koessler, Frédéric & Lambert-Mogiliansky, Ariane, 2014. "Extortion and political-risk insurance," Journal of Public Economics, Elsevier, vol. 120(C), pages 144-156.
    9. repec:ces:ifodic:v:9:y:2011:i:2:p:16132588 is not listed on IDEAS
    10. 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.
    11. Yang, Kaiyuan & Ma, Pengcheng & Cui, Lin, 2021. "Subnational corruption and foreign firms’ performance: Evidence from China," Journal of Business Research, Elsevier, vol. 123(C), pages 106-116.
    12. Meixing Dai & Moïse Sidiropoulos & Eleftherios Spyromitros, 2015. "Fiscal Policy, Institutional Quality and Central Bank Transparency," Manchester School, University of Manchester, vol. 83(5), pages 523-545, September.
    13. Ariane Lambert-Mogiliansky, 2011. "Corruption and Collusion: Strategic Complements in Procurement," Chapters, in: Susan Rose-Ackerman & Tina Søreide (ed.), International Handbook on the Economics of Corruption, Volume Two, chapter 4, Edward Elgar Publishing.
    14. Angelo Antoci & Simone Borghesi & Gianluca Iannucci, 2021. "(Dis)honest bureaucrats and (non)compliant firms in an evolutionary game," Metroeconomica, Wiley Blackwell, vol. 72(2), pages 321-344, May.
    15. 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.
    16. AlShaikh AlAnoud Mohammed & Al-Adeem Khalid Rasheed, 2023. "Exploring the Current State of Forensic Accounting in Saudi Arabia and Possible Ways of Elevating It to Assist the Government Fighting Corruption," Journal of Forensic Accounting Profession, Sciendo, vol. 3(1), pages 1-37, June.
    17. Vassili Kolokoltsov, 2017. "The Evolutionary Game of Pressure (or Interference), Resistance and Collaboration," Mathematics of Operations Research, INFORMS, vol. 42(4), pages 915-944, November.
    18. 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.
    19. Vincenzo Alfano & Salvatore Capasso & Lodovico Santoro, 2023. "Corruption and the political system: some evidence from Italian regions," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(2), pages 665-695, July.
    20. 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.
    21. Dmitriy Knyazev, 2023. "How to fight corruption: Carrots and sticks," Economic Inquiry, Western Economic Association International, vol. 61(2), pages 413-429, April.
    22. Fan Liangcong & Ying Zechun & Yuan Yuemei & Zhang Xinchao & Xu Bin, 2019. "How Do Intermediaries Affect the Effectiveness of the Four-Eyes-Principle? An Experimental Investigation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-13, October.
    23. V. N. Kolokoltsov & O. A. Malafeyev, 2017. "Mean-Field-Game Model of Corruption," Dynamic Games and Applications, Springer, vol. 7(1), pages 34-47, March.
    24. Ajit Mishra & Andrew Samuel, 2013. "Corruption and Hold-Up: The Role of Intermediaries," Department of Economics Working Papers 12/13, University of Bath, Department of Economics.
    25. Pablo Morales, Jorge Finke, 2015. "Small-World Networks of corruption," Revista CIFE, Universidad Santo Tomás, August.

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    More about this item

    Keywords

    Petty corruption; Intermediaries; Game-theory;
    All these keywords.

    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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