IDEAS home Printed from https://ideas.repec.org/p/lmu/muenar/19202.html
   My bibliography  Save this paper

A market for connections

Author

Listed:
  • Miettinen, Topi
  • Poutvaara, Panu

Abstract

Government or company decisions on whom to hire or whom to give a contract are mostly delegated to politicians, public sector officials or human resource and procurement managers. Due to anti-corruption laws, agents cannot sell contracts that they are delegated to decide upon. Even if bribing is ruled out, those interested in the spoils may invest in a good relationship with the deciding agents in order to be remembered when the decision is made. In this paper, we analyze such markets for connections in the presence of convex costs of networking.

Suggested Citation

  • Miettinen, Topi & Poutvaara, Panu, 2014. "A market for connections," Munich Reprints in Economics 19202, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenar:19202
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jackson, Matthew O. & van den Nouweland, Anne, 2005. "Strongly stable networks," Games and Economic Behavior, Elsevier, vol. 51(2), pages 420-444, May.
    2. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
    3. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
    4. Elinder, Mikael & Jordahl, Henrik, 2013. "Political preferences and public sector outsourcing," European Journal of Political Economy, Elsevier, vol. 30(C), pages 43-57.
    5. McBride Michael, 2006. "Limited Observation in Mutual Consent Networks," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-29, August.
    6. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
    7. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    8. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521692083, October.
    9. Andrea Prat & Aldo Rustichini, 2003. "Games Played Through Agents," Econometrica, Econometric Society, vol. 71(4), pages 989-1026, July.
    10. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2011. "Social interactions and spillovers," Games and Economic Behavior, Elsevier, vol. 72(2), pages 339-360, June.
    11. Andrea Galeotti, 2010. "Talking, Searching, And Pricing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(4), pages 1159-1174, November.
    12. Marco Marinucci & Wouter Vergote, 2011. "Endogenous Network Formation in Patent Contests And Its Role as A Barrier to Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 529-551, December.
    13. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
    14. Leonardo Felli & Antonio Merlo, 2006. "Endogenous Lobbying," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 180-215, March.
    15. Gerard Debreu, 1963. "On a Theorem of Scarf," Review of Economic Studies, Oxford University Press, vol. 30(3), pages 177-180.
    16. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    17. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 305-318, October.
    18. Van Long, Ngo, 2013. "The theory of contests: A unified model and review of the literature," European Journal of Political Economy, Elsevier, vol. 32(C), pages 161-181.
    19. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521871525, October.
    20. repec:ags:afjare:141665 is not listed on IDEAS
    21. Martin J. Osborne & Al Slivinski, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 65-96.
    22. Amegashie, J. Atsu, 2012. "Productive versus destructive efforts in contests," European Journal of Political Economy, Elsevier, vol. 28(4), pages 461-468.
    23. Franke, Jörg, 2012. "Affirmative action in contest games," European Journal of Political Economy, Elsevier, vol. 28(1), pages 105-118.
    24. Roger B. Myerson & Daniel Diermeier, 1999. "Bicameralism and Its Consequences for the Internal Organization of Legislatures," American Economic Review, American Economic Association, vol. 89(5), pages 1182-1196, December.
    25. Lambert-Mogiliansky, Ariane, 2002. "Why firms pay occasional bribes: the connection economy," European Journal of Political Economy, Elsevier, vol. 18(1), pages 47-60, March.
    26. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Itkonen, Juha, 2017. "Efficiency and dependency in a network of linked permit markets," Research Discussion Papers 20/2017, Bank of Finland.
    2. Habib, Ahsan & Muhammadi, Abdul Haris & Jiang, Haiyan, 2017. "Political Connections and Related Party Transactions: Evidence from Indonesia," The International Journal of Accounting, Elsevier, vol. 52(1), pages 45-63.
    3. Habib, Ahsan & Ranasinghe, Dinithi & Muhammadi, Abdul Haris & Islam, Ainul, 2018. "Political connections, financial reporting and auditing: Survey of the empirical literature," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 31(C), pages 37-51.
    4. Miroslav Palanský, 2021. "The value of political connections in the post-transition period: evidence from Czechia," Public Choice, Springer, vol. 188(1), pages 121-154, July.
    5. Miettinen, Topi & Poutvaara, Panu, 2015. "Parties as efficiency-improving gatekeepers in rent-seeking societies," European Journal of Political Economy, Elsevier, vol. 38(C), pages 87-101.
    6. repec:zbw:bofrdp:2017_020 is not listed on IDEAS
    7. Schlecht, Laura & Schneider, Sabrina & Buchwald, Arne, 2021. "The prospective value creation potential of Blockchain in business models: A delphi study," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    8. Jacques Simon Song, 2021. "Le rôle des clivages des partis politiques dans le renforcement de la démocratie en Afrique," African Development Review, African Development Bank, vol. 33(1), pages 91-103, March.
    9. Dong, Zhiqiang & Wang, Xiaobing & Zhang, Tianhua & Zhong, Yuejun, 2022. "The effects of local government leadership turnover on entrepreneurial behavior," China Economic Review, Elsevier, vol. 71(C).
    10. Budi Wahyono, 2023. "Do political connections affect the market reaction to firms’ inclusion in or exclusion from the Sharia index?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(4), pages 835-854, December.
    11. Tariq H. Ismail & Mohamed El-Deeb & Yasser Tawfik Halim, 2022. "Do related party transactions affect the relationship between political connections and firm value? Evidence from Egypt," Future Business Journal, Springer, vol. 8(1), pages 1-12, December.
    12. Itkonen, Juha, 2017. "Efficiency and dependency in a network of linked permit markets," Bank of Finland Research Discussion Papers 20/2017, Bank of Finland.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miettinen, Topi & Poutvaara, Panu, 2006. "Political Parties and Rent-seeking through Networks," Munich Reprints in Economics 19204, University of Munich, Department of Economics.
    2. Topi Miettinen & Panu Poutvaara, 2006. "Political Parties and Network Formation," CESifo Working Paper Series 1663, CESifo.
    3. Zudenkova, Galina, 2010. "Sincere Lobby Formation," Working Papers 2072/151545, Universitat Rovira i Virgili, Department of Economics.
    4. Testa, Cecilia, 2003. "Government corruption and legislative procedures: is one chamber better than two?," LSE Research Online Documents on Economics 6642, London School of Economics and Political Science, LSE Library.
    5. Goyal, S., 2016. "Networks and Markets," Cambridge Working Papers in Economics 1652, Faculty of Economics, University of Cambridge.
    6. Roberti, Paolo, 2019. "Citizens or lobbies: Who controls policy?," Games and Economic Behavior, Elsevier, vol. 113(C), pages 497-514.
    7. Hellmann, Tim & Landwehr, Jakob, 2014. "Stable Networks in Homogeneous Societies," Center for Mathematical Economics Working Papers 517, Center for Mathematical Economics, Bielefeld University.
    8. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    9. Scott Gehlbach & Konstantin Sonin & Ekaterina Zhuravskaya, 2010. "Businessman Candidates," American Journal of Political Science, John Wiley & Sons, vol. 54(3), pages 718-736, July.
    10. Mattozzi, Andrea & Merlo, Antonio, 2008. "Political careers or career politicians?," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 597-608, April.
    11. Leonardo Felli & Antonio Merlo, 2006. "Endogenous Lobbying," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 180-215, March.
    12. Arianna Degan & Antonio Merlo, 2006. "Do Voters Vote Sincerely?," PIER Working Paper Archive 06-008, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    13. Valentino Larcinese, 2011. "Enfranchisement and Representation: Italy 1909-1913," STICERD - Economic Organisation and Public Policy Discussion Papers Series 032, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    14. Michela Redoano, 2010. "Does Centralization Affect the Number and Size of Lobbies?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(3), pages 407-435, June.
    15. Petrova, Maria, 2012. "Mass media and special interest groups," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 17-38.
    16. Arye L. Hillman & Ngo Van Long, 2017. "Rent Seeking: The Social Cost of Contestable Benefits," CESifo Working Paper Series 6462, CESifo.
    17. P. Roberti, 2014. "Lobbying in a multidimensional policy space with salient issues," Working Papers wp922, Dipartimento Scienze Economiche, Universita' di Bologna.
    18. A Bhattacharya, "undated". "Stable and Efficient Networks with Farsighted Players: the Largest Consistent Set," Discussion Papers 09/34, Department of Economics, University of York.
    19. Hannes Mueller, 2007. "Political Support and Candidate Choice," JEPS Working Papers 07-002, JEPS.
    20. Mattozzi, Andrea & Merlo, Antonio, 2015. "Mediocracy," Journal of Public Economics, Elsevier, vol. 130(C), pages 32-44.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lmu:muenar:19202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tamilla Benkelberg (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.