Beneficial Collusion in Corruption Control: The Case of Nonmonetary Penalties

Mehmet Bac and Parimal Bag

No 205, School of Economics Discussion Papers from School of Economics, 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.

Keywords: Corruption; monitoring; collusion; bounty hunter mechanism (search for similar items in EconPapers)
JEL-codes: D73 D78 K42 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2005-04
New Economics Papers: this item is included in nep-law and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Beneficial collusion in corruption control: The case of nonmonetary penalties (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0205

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