Committing to transparency to resist corruption
This paper examines firms' incentives to commit to a transparent behavior (that precludes bribery) in a competitive procedure modeled as an asymmetric information beauty contest managed by a corrupt agent. In his evaluation of firms' offers for a public contract the agent has some discretion to favor a firm in exchange of a bribe. It is shown that a conditional commitment mechanism can eliminate corruption when it is pure extortion. Otherwise, when corruption can affect allocation and the market's profitability is small, a low quality firm may prefer not to commit. In that situation, the existence of a separating equilibrium in which only the high quality firms commit is guaranteed when commitment decisions are kept secret, but requires some conditions on firms' beliefs when commitment decisions are publicly announced. Generally, a unilateral commitment mechanism that rewards commitment with a bonus performs less well. A mechanism combining both conditional commitment and a bonus has the potential to fully eliminate corruption.
|Date of creation:||Jun 2010|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00564890|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kalai, Adam Tauman & Kalai, Ehud & Lehrer, Ehud & Samet, Dov, 2010. "A commitment folk theorem," Games and Economic Behavior, Elsevier, vol. 69(1), pages 127-137, May.
- Renou, Ludovic, 2009. "Commitment games," Games and Economic Behavior, Elsevier, vol. 66(1), pages 488-505, May.
- Bade, Sophie & Haeringer, Guillaume & Renou, Ludovic, 2009.
Journal of Economic Theory,
Elsevier, vol. 144(4), pages 1817-1831, July.
- Sophie Bade & Guillaume Haeringer & Ludovic Renou, 2008. "Bilateral Commitment," Discussion Papers in Economics 08/20, Department of Economics, University of Leicester.
- Guillaume Haeringer & Sophie Bade & Ludovic Renou, 2006. "Bilateral Commitment," Working Papers 2006.75, Fondazione Eni Enrico Mattei.
- Sophie Bade & Guillaume Haeringer & Ludovic Renou, 2006. "Bilateral Commitment," School of Economics Working Papers 2006-07, University of Adelaide, School of Economics.
- Simon, Leo K & Zame, William R, 1990.
"Discontinuous Games and Endogenous Sharing Rules,"
Econometric Society, vol. 58(4), pages 861-72, July.
- Simon, Leo K. & Zame, William R., 1987. "Discontinous Games and Endogenous Sharing Rules," Department of Economics, Working Paper Series qt8n46v2wv, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Leo K. Simon and William R. Zame., 1987. "Discontinuous Games and Endogenous Sharing Rules," Economics Working Papers 8756, University of California at Berkeley.
- Ariane Lambert-Mogiliansky & Grigory Kosenok, 2009.
"Fine-Tailored for the Cartel-Favoritism in Procurement,"
Review of Industrial Organization,
Springer;The Industrial Organization Society, vol. 35(1), pages 95-121, September.
- Ariane Lambert-Mogiliansky & Grigory Kosenok, 2009. "Fine-Tailored for the Cartel-Favoritism in Procurement," Post-Print halshs-00754339, HAL.
- Peters, Michael & Troncoso-Valverde, Cristian, 2010.
"A Folk Theorem for Competing Mechanisms,"
Microeconomics.ca working papers
michael_peters-2010-17, Vancouver School of Economics, revised 19 Oct 2013.
- Celik, Gorkem & Peters, Michael, 2011.
"Reciprocal Relationships and Mechanism Design,"
Microeconomics.ca working papers
gorkem_celik-2011-19, Vancouver School of Economics, revised 01 Aug 2011.
- repec:cup:cbooks:9780521659123 is not listed on IDEAS
- Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
- Robinson, James A & Torvik, Ragnar, 2002.
CEPR Discussion Papers
3459, C.E.P.R. Discussion Papers.
- Andersson, Per & Hultén, Staffan & Valiente, Pablo, 2005. "Beauty contest licensing lessons from the 3G process in Sweden," Telecommunications Policy, Elsevier, vol. 29(8), pages 577-593, September.
- Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
- Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
- repec:cup:cbooks:9780521632935 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:hal:psewpa:halshs-00564890. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.