Corruption and decisions on opening up markets

Quan Dong and Juan Bárcena-Ruiz

Economic Modelling, 2014, vol. 36, issue C, 23-29

Abstract: We consider a mixed duopoly with a private firm, domestic or foreign-owned, competing with a public firm. We analyze the extent to which opening policy is affected by lobbying efforts and rent-seeking behaviors. We obtain the counterintuitive result that corruption may improve social welfare when the government neglects corruption and does not prevent it, as the scope for the entry of a foreign private firm is greater. Moreover, the government may prevent corrupt activities by policy-makers by requiring the entrant firm to buy a license to operate in the market. In this case, the scope for external opening up is greater than in the other cases and social welfare is further improved when the entrant firm is foreign-owned.

Keywords: Mixed duopoly; Opening; Entry; Corruption (search for similar items in EconPapers)
JEL-codes: L13 L32 L38 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:36:y:2014:i:c:p:23-29

DOI: 10.1016/j.econmod.2013.09.015

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