IDEAS home Printed from https://ideas.repec.org/p/sur/surrec/0205.html
   My bibliography  Save this paper

Beneficial Collusion in Corruption Control: The Case of Nonmonetary Penalties

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://repec.som.surrey.ac.uk/2005/DP02-05.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Itoh Hideshi, 1993. "Coalitions, Incentives, and Risk Sharing," Journal of Economic Theory, Elsevier, vol. 60(2), pages 410-427, August.
    2. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-159, January.
    3. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    4. Abhijit V. Banerjee, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1289-1332.
    5. Basu, Kaushik & Bhattacharya, Sudipto & Mishra, Ajit, 1992. "Notes on bribery and the control of corruption," Journal of Public Economics, Elsevier, vol. 48(3), pages 349-359, August.
    6. Kofman, Fred & Lawarree, Jacques, 1993. "Collusion in Hierarchical Agency," Econometrica, Econometric Society, vol. 61(3), pages 629-656, May.
    7. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    8. Jean-Jacques Laffont & Jean Tirole, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1089-1127.
    9. Kofman, Fred & Lawarree, Jacques, 1996. "On the optimality of allowing collusion," Journal of Public Economics, Elsevier, vol. 61(3), pages 383-407, September.
    10. Hindriks, Jean & Keen, Michael & Muthoo, Abhinay, 1999. "Corruption, extortion and evasion," Journal of Public Economics, Elsevier, vol. 74(3), pages 395-430, December.
    11. Marjit, Sugata & Shi, Heling, 1998. "On controlling crime with corrupt officials," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 163-172, January.
    12. Olsen, Trond E & Torsvik, Gaute, 1998. "Collusion and Renegotiation in Hierarchies: A Case of Beneficial Corruption," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 413-438, May.
    13. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    14. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
    15. Kessler, Anke S., 2000. "On Monitoring and Collusion in Hierarchies," Journal of Economic Theory, Elsevier, vol. 91(2), pages 280-291, April.
    16. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-141, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. Tran, My Thi Ha, 2021. "Public Sector Management And Corruption In Asean Plus Six," OSF Preprints stxw4, Center for Open Science.
    3. Vianney Dequiedt & Anne-Marie Geourjon & Grégoire Rota-Graziosi, 2011. "Mutual Supervision in Preshipment Inspection Programs," CERDI Working papers halshs-00554316, HAL.
    4. Salvatore Capasso & Rajeev K. Goel & James W. Saunoris, 2019. "Is it the gums, teeth or the bite? Effectiveness of dimensions of enforcement in curbing corruption," Economics of Governance, Springer, vol. 20(4), pages 329-369, December.
    5. 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.
    6. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bernard Gauthier & Jonathan Goyette, 2016. "Fiscal policy and corruption," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(1), pages 57-79, January.
    2. Mishra, Ajit, 2002. "Hierarchies, incentives and collusion in a model of enforcement," Journal of Economic Behavior & Organization, Elsevier, vol. 47(2), pages 165-178, February.
    3. Fahad Khalil & Jacques Lawarrée & Sungho Yun, 2010. "Bribery versus extortion: allowing the lesser of two evils," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 179-198, March.
    4. Che, Xiaogang & Huang, Yangguang & Zhang, Le, 2021. "Supervisory efficiency and collusion in a multiple-agent hierarchy," Games and Economic Behavior, Elsevier, vol. 130(C), pages 425-442.
    5. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
    6. Marjit, Sugata & Mukherjee, Vivekananda & Mukherjee, Arijit, 2000. "Harassment, corruption and tax policy," European Journal of Political Economy, Elsevier, vol. 16(1), pages 75-94, March.
    7. Alexander Henke & Fahad Khalil & Jacques Lawarree, 2022. "Honest agents in a corrupt equilibrium," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 762-783, August.
    8. Arjona Trujillo, Ana María, 2002. "La corrupción política: una revisión de la literatura," DE - Documentos de Trabajo. Economía. DE de021404, Universidad Carlos III de Madrid. Departamento de Economía.
    9. Cooter, Robert & Garoupa, Nuno, 2000. "The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes," Berkeley Olin Program in Law & Economics, Working Paper Series qt83c0k3wc, Berkeley Olin Program in Law & Economics.
    10. Roberto Burguet & Juan-José Ganuza & José García-Montalvo, 2016. "The Microeconomics of Corruption. A Review of Thirty Years of Research," Working Papers 908, Barcelona School of Economics.
    11. Hindriks, Jean & Keen, Michael & Muthoo, Abhinay, 1999. "Corruption, extortion and evasion," Journal of Public Economics, Elsevier, vol. 74(3), pages 395-430, December.
    12. John Bone & Dominic Spengler, 2014. "Does Reporting Decrease Corruption?," Journal of Interdisciplinary Economics, , vol. 26(1-2), pages 161-186, January.
    13. Dongsoo Shin, 2007. "Contracts under Wage Compression: A Case of Beneficial Collusion," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 143-157, July.
    14. Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2004. "Organised crime, corruption and punishment," Discussion Paper Series In Economics And Econometrics 0407, Economics Division, School of Social Sciences, University of Southampton.
    15. 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.
    16. Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2010. "The public management of risk: Separating ex ante and ex post monitors," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1008-1019, December.
    17. Kugler, Maurice & Verdier, Thierry & Zenou, Yves, 2005. "Organized crime, corruption and punishment," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1639-1663, September.
    18. Cooter Robert D. & Garoupa Nuno, 2014. "A Disruption Mechanism for Bribes," Review of Law & Economics, De Gruyter, vol. 10(3), pages 241-263, November.
    19. Jan U. Auerbach, 2019. "Property rights enforcement with unverifiable incomes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(3), pages 701-735, October.
    20. Jean-Bernard Chatelain & Kirsten Ralf, 2005. "Tax Evasion, Investors Protection and Corporate Governance," Money Macro and Finance (MMF) Research Group Conference 2005 65, Money Macro and Finance Research Group.

    More about this item

    Keywords

    Corruption; monitoring; collusion; bounty hunter mechanism;
    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
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sur:surrec:0205. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ioannis Lazopoulos (email available below). General contact details of provider: https://edirc.repec.org/data/desuruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.