Is it reasonable to legalize tea money?

Hideki Sato ()
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Hideki Sato: Arts Fukuoka Women’s University

Economic Theory Bulletin, 2022, vol. 10, issue 2, No 6, 267-272

Abstract: Abstract In developing countries, public servants often seek small illegal payments at checkpoints, customs, and entries. Such payments are informally known as tea money. Tea money is illegal in Indonesia, but legal in Thailand. In this study, we hypothesize the circumstances in which two customs officials handling entry permits at the border include a fixed sum of tea money in the customs duty. Based on the Cournot equilibrium, we compare the total amount of tea money between them when it is illegal (i.e., a bribe) and legal (i.e., an administrative service charge). We argue that the legalization of tea money is reasonable as the relationship between the two agents changes according to the level of penalty imposed.

Keywords: Tea money; Bribe; Legalization; Cournot equilibrium; Penalty (search for similar items in EconPapers)
JEL-codes: D73 K42 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s40505-022-00231-5

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