[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/eid/wpaper/37907.html
   My bibliography  Save this paper

Corruption and Hold-Up: The Role of Intermediaries

Author

Listed:
  • Ajit Mishra

    (University of Bath)

  • Andrew Samuel

    (Loyola University Maryland)

Abstract
Corrupt contracts are illegal and, therefore, vulnerable to hold-up. That is, a bureaucrat who has accepted a bribe from a firm in exchange for a license may still choose not to grant the firm that license (hold-up). This paper develops a model to study the role that intermediaries play in preventing hold-up. There are two types of firms, good firms that are legally entitled to receive a license, and harmful firms that are not. Without intermediaries only good firms enter the market, and harmful firms do not enter because of hold-up. Intermediaries are legally permitted to help firms reduce their navigation costs of obtaining licenses. Thus, intermediaries increase entry of good firms. However, by utilizing the legalaspects of their transaction with good firms as leverage against the bureaucrat, intermediaries can prevent hold-up among harmful firms. Thus, intermediaries increase participation by both good and harmful firms and their welfare costs are ambiguous. Data obtained from occurrences of violations of the Foreign Corrupt Practices Act are broadly consistent with our model.

Suggested Citation

  • Ajit Mishra & Andrew Samuel, 2013. "Corruption and Hold-Up: The Role of Intermediaries," Department of Economics Working Papers 12/13, University of Bath, Department of Economics.
    • Handle: RePEc:eid:wpaper:37907
    as

    Download full text from publisher

    File URL: https://purehost.bath.ac.uk/ws/files/22934124/Corruption_and_Hold_Up.pdf
    File Function: Final published version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Bjorvatn, Kjetil & Torsvik, Gaute & Tungodden, Bertil, 2004. "How middle-men can undermine anti-corruption reforms," Working Papers in Economics 12/04, University of Bergen, Department of Economics.
    3. Jay Pil Choi & Marcel Thum, 2004. "The Economics of Repeated Extortion," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 203-223, Summer.
    4. Basu, Kaushik, 2011. "Why, for a Class of Bribes, the Act of Giving a Bribe should be Treated as Legal," MPRA Paper 50335, University Library of Munich, Germany.
    5. Lambert-Mogiliansky, Ariane & Majumdar, Mukul & Radner, Roy, 2007. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," Journal of Development Economics, Elsevier, vol. 83(2), pages 351-367, July.
    6. Gautam Bose & Shubhashis Gangopadhyay, 2009. "Intermediation in corruption markets," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 2(1), pages 39-55, April.
    7. Hasker, Kevin & Okten, Cagla, 2008. "Intermediaries and corruption," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 103-115, July.
    8. Lambsdorff, Johann & Nell, Mathias, 2007. "Fighting corruption with asymmetric penalties and leniency," University of Göttingen Working Papers in Economics 59, University of Goettingen, Department of Economics.
    9. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    10. Leonardo Felli & J. Miguel Villas‐Boas, 2000. "Renegotiation and Collusion in Organizations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 453-483, December.
    11. Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2009. "Strategic analysis of petty corruption with an intermediary," Review of Economic Design, Springer;Society for Economic Design, vol. 13(1), pages 45-57, April.
    12. Spagnolo, Giancarlo, 2004. "Divide et Impera: Optimal Leniency Programmes," CEPR Discussion Papers 4840, C.E.P.R. Discussion Papers.
    13. Mikhail Drugov & John Hamman & Danila Serra, 2014. "Intermediaries in corruption: an experiment," Experimental Economics, Springer;Economic Science Association, vol. 17(1), pages 78-99, March.
    14. Güzin Bayar, 2005. "The role of intermediaries in corruption," Public Choice, Springer, vol. 122(3), pages 277-298, March.
    15. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    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)

    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. 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.
    2. Graf Lambsdorff, Johann, 2010. "Deterrence and constrained enforcement: Alternative regimes to deal with bribery," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-60-10, University of Passau, Faculty of Business and Economics.
    3. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    4. John Bone & Dominic Spengler, 2014. "Does Reporting Decrease Corruption?," Journal of Interdisciplinary Economics, , vol. 26(1-2), pages 161-186, January.
    5. Perrotta Berlin, Maria & Spagnolo, Giancarlo & Qin, Bei, 2015. "Leniency, Asymmetric Punishment and Corruption: Evidence from China," SITE Working Paper Series 34, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 25 May 2017.
    6. Hu, Lin & Oak, Mandar, 2023. "Intermediated corruption under asymmetric punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 490-499.
    7. Dominic Spengler, 2012. "Endogenising Detection in an Asymmetric Penalties Corruption Game," Discussion Papers 12/20, Department of Economics, University of York.
    8. Cooter Robert D. & Garoupa Nuno, 2014. "A Disruption Mechanism for Bribes," Review of Law & Economics, De Gruyter, vol. 10(3), pages 241-263, November.
    9. Charles Angelucci & Antonio Russo, 2015. "Petty Corruption and Citizen Reports," CESifo Working Paper Series 5528, CESifo.
    10. Spengler Dominic, 2014. "Endogenous Detection of Collaborative Crime: The Case of Corruption," Review of Law & Economics, De Gruyter, vol. 10(2), pages 201-217, July.
    11. Charles Angelucci & Antonio Russo, 2015. "Petty corruption and citizen feedback," Working Papers 2015/25, Institut d'Economia de Barcelona (IEB).
    12. Charles Angelucci & Antonio Russo, 2022. "Petty Corruption And Citizen Reports," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 831-848, May.
    13. Martin Dufwenberg & Giancarlo Spagnolo, 2011. "Legalizing Bribes," EIEF Working Papers Series 1117, Einaudi Institute for Economics and Finance (EIEF), revised Dec 2011.
    14. Dmitriy Knyazev, 2023. "How to fight corruption: Carrots and sticks," Economic Inquiry, Western Economic Association International, vol. 61(2), pages 413-429, April.
    15. Mikhail Drugov & John Hamman & Danila Serra, 2014. "Intermediaries in corruption: an experiment," Experimental Economics, Springer;Economic Science Association, vol. 17(1), pages 78-99, March.
    16. Abbink, Klaus & Wu, Kevin, 2017. "Reward self-reporting to deter corruption: An experiment on mitigating collusive bribery," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 256-272.
    17. Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2009. "Strategic analysis of petty corruption with an intermediary," Review of Economic Design, Springer;Society for Economic Design, vol. 13(1), pages 45-57, April.
    18. Lin Hu & Mandar Oak, 2023. "Can asymmetric punishment deter endogenous bribery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(1), pages 3-21, January.
    19. Martin Dufwenberg & Giancarlo Spagnolo, 2015. "Legalizing Bribe Giving," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 836-853, April.
    20. Fredriksson, Anders, 2014. "Bureaucracy intermediaries, corruption and red tape," Journal of Development Economics, Elsevier, vol. 108(C), pages 256-273.

    More about this item

    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:eid:wpaper:37907. 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: Scholarly Communications Librarian (email available below). General contact details of provider: https://edirc.repec.org/data/debatuk.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.