Committing to transparency to resist corruption

Frederic Koessler and Ariane Lambert-Mogiliansky

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Abstract: This paper examines firms' incentives to commit to a transparent behavior (that precludes bribery) in a competitive procedure modeled as an asymmetric information beauty contest managed by a corrupt agent. In his evaluation of firms' offers for a public contract the agent has some discretion to favor a firm in exchange of a bribe. It is shown that a conditional commitment mechanism can eliminate corruption when it is pure extortion. Otherwise, when corruption can affect allocation and the market's profitability is small, a low quality firm may prefer not to commit. In that situation, the existence of a separating equilibrium in which only the high quality firms commit is guaranteed when commitment decisions are kept secret, but requires some conditions on firms' beliefs when commitment decisions are publicly announced. Generally, a unilateral commitment mechanism that rewards commitment with a bonus performs less well. A mechanism combining both conditional commitment and a bonus has the potential to fully eliminate corruption.

Keywords: commitment; bribery; competitive procedures; transparency (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-cis and nep-cta
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00564890v1
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Committing to transparency to resist corruption (2013)
Working Paper: Committing to transparency to resist corruption (2013)
Working Paper: Committing to transparency to resist corruption (2013)
Working Paper: Committing to transparency to resist corruption (2010)
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