Rent Seeking and Judicial Bias in Weak Legal Systems
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.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia|
Phone: +61 3 8344 5355
Fax: +61 3 8344 6899
Web page: http://fbe.unimelb.edu.au/economics
More information through EDIRC
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.:
- Fudenberg, Drew & Levine, David, 1998.
"Learning in games,"
European Economic Review,
Elsevier, vol. 42(3-5), pages 631-639, May.
- 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.
- Eric van Damme & Sjaak Hurkens, 1996.
"Endogenous Stackelberg leadership,"
Economics Working Papers
190, Department of Economics and Business, Universitat Pompeu Fabra.
- van Damme, E.E.C. & Hurkens, J.P.M., 1996. "Endogenous Stackelberg Leadership," Discussion Paper 1996-115, Tilburg University, Center for Economic Research.
- van Damme, E.E.C. & Hurkens, J.P.M., 1999. "Endogenous Stackelberg leadership," Other publications TiSEM 83a05fd8-4285-48f3-84ef-3, Tilburg University, School of Economics and Management.
- 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-, June.
- 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.
- Daniel Kaufmann & Shang-Jin Wei, 2000. "Does 'Grease Money' Speed Up the Wheels of Commerce?," IMF Working Papers 00/64, International Monetary Fund.
- Kaufmann, Daniel & Wei, Shang-Jin, 1999. "Does 'Grease Money' Speed Up the Wheels of Commerce?," MPRA Paper 8209, University Library of Munich, Germany.
- Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
- Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December.
- Farmer, Amy & Pecorino, Paul, 1999. "Legal Expenditure as a Rent-Seeking Game," Public Choice, Springer, vol. 100(3-4), pages 271-88, September.
When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:925. 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: (Katherine Perez)
If references are entirely missing, you can add them using this form.