Committing to transparency to resist corruption

Pre-print, Working paper: 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.

Author(s)

Frédéric Koessler, Ariane Lambert-Mogiliansky

Date of publication
  • 2010
Keywords JEL
C72 D21 D44 D73 H57
Keywords
  • Commitment
  • Bribery
  • Competitive procedures
  • Transparency
Internal reference
  • PSE Working Papers n°2010-18
Version
  • 1