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Beneficial Collusion in Corruption Control: The Case of Nonmonetary Penalties

Author

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  • Mehmet Bac

    (Sabanci University)

  • Parimal Kanti Bag

    (University of Surrey)

Abstract

We analyze a corruption model where a principal seeks to control an agent’s corruption by supplementing a costless noncollusive outside detector such as the media with a collusive internal supervisor. The principal’s objective is to minimize the overall costs, made up of enforcement costs and social costs of corruption. If the penalties on the corrupt agent and a failing supervisor are nonmonetary in nature and yet the two parties can engage in monetary side-transfers, the principal may stand to benefit by allowing supervisor-agent collusion. This benefit may even prompt the principal to actively encourage collusion by hiring a dishonest supervisor in strict preference over an honest supervisor.

Suggested Citation

  • Mehmet Bac & Parimal Kanti Bag, 2005. "Beneficial Collusion in Corruption Control: The Case of Nonmonetary Penalties," School of Economics Discussion Papers 0205, School of Economics, University of Surrey.
  • Handle: RePEc:sur:surrec:0205
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    References listed on IDEAS

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    Cited by:

    1. Dequiedt, V. & Geourjon, A.-M. & Rota-Graziosi, G., 2012. "Mutual supervision in preshipment inspection programs," Journal of Development Economics, Elsevier, vol. 99(2), pages 282-291.
    2. Celik, Gorkem & Sayan, Serdar, 2005. "To Give In or Not To Give In To Bribery? Setting the Optimal Fines for Violations of Rules when the Enforcers are Likely to Ask for Bribes," Microeconomics.ca working papers celik-05-08-03-12-50-26, Vancouver School of Economics, revised 06 Aug 2008.
    3. Burlando, Alfredo & Motta, Alberto, 2016. "Legalize, tax, and deter: Optimal enforcement policies for corruptible officials," Journal of Development Economics, Elsevier, vol. 118(C), pages 207-215.

    More about this item

    Keywords

    Corruption; monitoring; collusion; bounty hunter mechanism;

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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