Lambert-Mogiliansky, Ariane Majumdar, Mukul Radner, Roy
Year of Publication:
CAE Working Paper No. 08-09
Cornell University, Center for Analytical Economics (CAE), Ithaca, NY
The paper explores a game-theoreticmodel of petty corruption involving a sequence of entrepreneurs and a track of bureaucrats. Each entrepreneur's project is approved if and only if it is cleared by each bureaucrat. The project value is stochastic; its value is observed only by the entrepreneur, but its distribution is commonknowledge. Each bureaucrat clears the project only if a bribe is paid. The bribe for qualified projects (extortion) and unqualified projects (capture) may differ. We identify the nature and welfare implications of different types of equilibria under appropriate technical assumptions on the structure of the game.
corruption repeated games hold up extortion capture