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Committing to transparency to resist corruption

  • Frédéric Koessler

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Ariane Lambert-Mogiliansky

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

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.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00564890.

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Date of creation: Jun 2010
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Handle: RePEc:hal:psewpa:halshs-00564890
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  1. Leo K. Simon and William R. Zame., 1987. "Discontinuous Games and Endogenous Sharing Rules," Economics Working Papers 8756, University of California at Berkeley.
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