Cadot, O. (1987), Corruption as a Gamble

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Revision as of 15:49, 16 May 2012 by imported>Moshe (New page: Return to BPP Field Exam Papers 2012] ===Model=== *Firm has to request operational permit from official *Official asks bribe, b, from firm *Firm pays bribe if b<v, if not reports offi...)
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Return to BPP Field Exam Papers 2012]

Model

  • Firm has to request operational permit from official
  • Official asks bribe, b, from firm
  • Firm pays bribe if b<v, if not reports official who is fired
  • infinite period game

Competitive Statics

  • If wages raised optimal bribe requested is smaller, but because its smaller, it is paid more often
  • So paying higher wages in public sector could lead to more but petty corruption
  • When discount factor is bigger the size of the bribe is smaller, because official cares more about the future.
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