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Rent Seeking and Judicial Bias in Weak Legal Systems

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  • Peter Bardsley
  • Quan Nguyen

Abstract

We model rent seeking in litigation in weak legal systems as a Tulloch contest in which litigators may seek to influence the court directly through bribery as well as through the merit of the legal case that they bring. If the local firm has a competitive advantage in influencing the court then there is a strategic asymmetry between the players: the local firm regards expenditure by the foreign firm as a strategic complement, but the foreign firm regards local expenditure as a strategic substitute. This leads to different attitudes to commitment: the local firm would like to commit to a high level of effort to influence the court, the foreign firm to a low one. There is also an asymmetry in the commitment technology. It is not easy to commit to a low level of bribery, but it is feasible to commit to a high one: once a payment is made it cannot easily be recovered. We model the interaction as a two stage game: the players simultaneously commit to a minimum level of effort, then they play a simultaneous Tulloch influence game. We find a continuum of equilibria. An equilibrium selection argument selects a unique equilibrium that is outcome equivalent to the Stackelberg equilibrium of a simple Tulloch contest in which the local firm moves first. We thus find an argument for endogenous timing: the local firm moves first and secures a first mover advantage.

Suggested Citation

  • Peter Bardsley & Quan Nguyen, 2005. "Rent Seeking and Judicial Bias in Weak Legal Systems," Department of Economics - Working Papers Series 925, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:925
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    File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-05/925.pdf
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    References listed on IDEAS

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    1. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
    2. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    3. Daniel Kaufmann & Shang-Jin Wei, 1999. "Does "Grease Money" Speed Up the Wheels of Commerce?," NBER Working Papers 7093, National Bureau of Economic Research, Inc.
    4. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
    5. Vai-Lam Mui, 1999. "Contracting in the Shadow of a Corrupt Court," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(2), pages 249-249, June.
    6. Farmer, Amy & Pecorino, Paul, 1999. "Legal Expenditure as a Rent-Seeking Game," Public Choice, Springer, vol. 100(3-4), pages 271-288, September.
    7. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
    8. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-898, December.
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    More about this item

    Keywords

    judicial corruption; Tulloch contest; strategic asymmetry; commitment games; endogenous timing;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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