Strategic Analysis of Petty Corruption with an Entrepreneur and Multiple Bureaucrats
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Lin Hu
and
Mandar Oak
Abstract
We consider a game of petty corruption between entrepreneurs and multiple bureaucrats. The potential value of the entrepreneur’s project is stochastic and private, and it can be realized only if the project is approved by all the bureaucrats. The bureaucrats simultaneously make take-it-or-leave-it demands of bribes in exchange for approving the project. The entrepreneur can either pay the required bribes or seek costly legal recourse against non-approval. The paper shows that there are multiple equilibria in the one-shot game as well as in the dynamic version of the game in which a sequence of entrepreneurs applies to the set of bureaucrats to seek project approvals. We then characterize a compelling class of equilibria, namely the bribe-income-maximizing-equilibrium, and show that total bribe exchanged under such equilibria is non-monotonic in the cost of legal recourse. Hence, a small/incremental reduction to the cost of appeal is either ineffective or can backfire, i.e. increase the amount of corruption.
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Articles in the same Issue
- Frontmatter
- Research Articles
- Strategic Analysis of Petty Corruption with an Entrepreneur and Multiple Bureaucrats
- Environmental Policy in Vertical Markets with Downstream Pollution: Taxes Versus Standards
- The Impact of the CARES Stimulus Payments on COVID-19 Transmission and Mortality
- Reverses in Gender Salary Gaps Among STEM Faculty: Evidence from Mean and Quantile Decompositions
- Downstream Profit Effects of Horizontal Mergers: Horn & Wolinsky and von Ungern-Sternberg Revisited
- The Moderating Role of Decisiveness in the Attraction Effect
- Pension Reform and Improved Employment Protection: Effects on Older Men’s Employment Outcomes
- Relational Voluntary Environmental Agreements with Unverifiable Emissions
- Letters
- Labor Demand Responses to Changing Gas Prices
- Early Childhood Education Attendance and Students’ Later Outcomes in Europe
- The Long-Term Effects of Unilateral Divorce Laws on the Noncognitive Skill of Conscientiousness
- Lab versus Online Experiments: Gender Differences
- Pre-Exposure Prophylaxis and HIV Incidence
- Variants of Gender Bias and Sexual-Orientation Discrimination in Career Development
