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Is it reasonable to legalize tea money?

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  • Hideki Sato

    (Arts Fukuoka Women’s University)

Abstract

In developing countries, public servants often seek small illegal payments at checkpoints, customs, and entries. Such payments are informally known as tea money. Tea money is illegal in Indonesia, but legal in Thailand. In this study, we hypothesize the circumstances in which two customs officials handling entry permits at the border include a fixed sum of tea money in the customs duty. Based on the Cournot equilibrium, we compare the total amount of tea money between them when it is illegal (i.e., a bribe) and legal (i.e., an administrative service charge). We argue that the legalization of tea money is reasonable as the relationship between the two agents changes according to the level of penalty imposed.

Suggested Citation

  • Hideki Sato, 2022. "Is it reasonable to legalize tea money?," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(2), pages 267-272, October.
    • Handle: RePEc:spr:etbull:v:10:y:2022:i:2:d:10.1007_s40505-022-00231-5
    DOI: 10.1007/s40505-022-00231-5
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    References listed on IDEAS

    as
    1. Benjamin A. Olken & Patrick Barron, 2009. "The Simple Economics of Extortion: Evidence from Trucking in Aceh," Journal of Political Economy, University of Chicago Press, vol. 117(3), pages 417-452, June.
    2. Ariane Lambert‐Mogiliansky & Mukul Majumdar & Roy Radner, 2008. "Petty corruption: A game‐theoretic approach," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(2), pages 273-297, June.
    3. Amir, Rabah & Burr, Chrystie, 2015. "Corruption and socially optimal entry," Journal of Public Economics, Elsevier, vol. 123(C), pages 30-41.
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    More about this item

    Keywords

    Tea money; Bribe; Legalization; Cournot equilibrium; Penalty;
    All these keywords.

    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

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