SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

Abstract: Corruption is a widespread phenomenon around the world. Yet, models of hierarchical agency relationships tend not to predict collusion. The paper demonstrates that allowing collusion may be optimal if the principal cannot commit to an incentive scheme once and for all. The optimal extent of corruption depends on the efficacy of the legal system. It must be risky for the guilty parties to engage in corruption in order to make it worthwile curbing it.

Keywords: Commitment; collusion; renegotiation

JEL-codes: D73; D82; L22

44 pages, April 1995

Download statistics

• Stockholm School of Economics
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:hastef:0052This page generated on 2024-09-13 22:15:03.