Corruption in Entry Regulation: A Game-theoretic Analysis with a Track of Bureaucrats

Tetsuro Mizoguchi and Nguyen Van Quyen
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Tetsuro Mizoguchi: Institute of Economic Research, Kyoto University
Nguyen Van Quyen: Department of Economics, University of Ottawa

No 2008-008, Keio/Kyoto Joint Global COE Discussion Paper Series from Keio/Kyoto Joint Global COE Program

Abstract: In this paper, we analyze the corruption in entry regulation that involves an entrepreneur and a track of bureaucrats. Instead of formulating a game in extensive form to analyze the sequential nature of the process involved in the application for a permit, we focus on the corruption in entry regulations that involves both entrepreneur and multiple bureaucrats to negotiate simultaneously for bribes from the mechanism design perspectives. Our results are the following: First, because of the asymmetry of information, the entrepreneur might not obtain the required permit, although collectively as a group, the joint net payoff of the entrepreneur and the bureaucrats is positive. Second, the entrepreneur might pay the bribes without getting the permit.

Pages: 43 pages
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:kei:dpaper:2008-008

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