Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 1028: Corruption: Outbribing the Competition

Leonidas Koustougeras (), Manuel Santos () and Fei Xu ()
Additional contact information
Leonidas Koustougeras: University of Manchester, School of Social Sciences
Manuel Santos: University of Miami, School of Business Administration
Fei Xu: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden

Abstract: We develop a game-theoretic model of competing parties attempting to bribe a bureaucrat. We conclude that anticorruption policies in this context should be tailored to the underlying characteristics of the environment. We introduce some novel theoretical constructs: compensatory bribe functions embedding the bureaucrat's disposition towards the demands of each party, the interdependence of the competing interests (rival, complementary, orthogonal), and the relative abilities to pay bribes (balanced and unbalanced). We study the extent of corruption and bribe levels over these various dimensions. If interests are rival and the abilities to pay are balanced, we get a deadlock equilibrium in which bribes are submitted but the officer is unable to decide or favor a specific party.

Keywords: Corruption; bribe; adverse selection

JEL-codes: D71; D80; D82; D86

Language: English

32 pages, First version: October 24, 2024. Revised: August 12, 2025.

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