@techreport{Khalil2007Bribery,
abstract = {Rewards to prevent supervisors from accepting bribes create incentives for extortion. This raises the question whether a supervisor who can engage in bribery and extortion can still be useful in providing incentives. By highlighting the role of team work in forging information, we present a notion of soft information that makes supervision valuable. We show that a fear of inducing extortion may make it optimal to allow bribery, but extortion is never tolerated. Even though both increase incentive cost, extortion penalizes the agent after good behavior, while bribery penalizes the agent after bad behavior. Since bribery occurs when a violation is detected, the bribe is a penalty for bad behavior, and helps somewhat in providing incentive. We find that extortion is a more serious issue when incentives are primarily based on soft information, when the agent has a greater bargaining power while negotiating an illegal payment, or when the agent has weaker outside opportunities. Our analysis provides explanations why extortion may be less of a problem in developed countries.},
address = {M\"{u}nchen},
author = {Fahad Khalil and Jacques Lawarr\'{e}e and Sungho Yun},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {D82; L23; 330; Kontrolle; Organisationsstruktur; Anreizvertrag; Korruption; Framing; Theorie},
language = {eng},
number = {1993},
publisher = {CESifo},
title = {Bribery vs. extortion: allowing the lesser of two evils},
type = {CESifo working paper},
url = {http://hdl.handle.net/10419/26038},
year = {2007}
}
