Preemptive Bribery with Incomplete Information

Ajit Mishra and Andrew Samuel

No 13/13, Department of Economics Working Papers from University of Bath, Department of Economics

Abstract: This paper studies bribery between a firm and a supervisor who monitors the firm for compliance. Bribery occurs preemptively, that is before the supervisor exerts costly effort to discover the firm’s level of non-compliance and collect evidence for successful prosecution. In contrast to previous papers, preemptive bribery is modeled as a Bayesian signaling game because the supervisor is uninformed about the firm’s level of non-compliance. We show that when the collection of evidence is independent of the supervisor’s knowledge of the firm’s level of non-compliance, some (possibly all) firms always engage in preemptive bribery. However, if knowledge of the firm’s level of non-compliance has implications for the supervisor’s ability to collect evidence and prosecute, preemptive bribery can be completely eliminated. Results which apply to preemptive bribery under complete information do not apply here.

Date: 2013-07-10
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