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Committing to transparency to resist corruption

  • Frédéric Koessler

    (PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

  • Ariane Lambert-Mogiliansky

    (PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

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. 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.
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  4. Ariane Lambert-Mogiliansky & Grigory Kosenok, 2009. "Fine-Tailored for the Cartel-Favoritism in Procurement," Review of Industrial Organization, Springer, vol. 35(1), pages 95-121, September.
  5. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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  7. 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.
  8. Peters, Michael & Troncoso-Valverde, Cristián, 2013. "A folk theorem for competing mechanisms," Journal of Economic Theory, Elsevier, vol. 148(3), pages 953-973.
  9. 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.
  10. Renou, Ludovic, 2009. "Commitment games," Games and Economic Behavior, Elsevier, vol. 66(1), pages 488-505, May.
  11. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
  12. Rose-Ackerman,Susan, 1999. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9780521632935.
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  14. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
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