Working Paper: CEPR ID: DP16481
Authors: Roberto Burguet; Elisabetta Iossa; Giancarlo Spagnolo
Abstract: We study the relationship between collusion and corruption in a stylized model of repeated procurement where the cost of reporting corrupt bureaucrats gives rise to a free riding problem. Cooperation among honest suppliers alleviates free-riding in reporting. However, it also facilitates collusion in bidding by increasing the value of the collusive rent. In turn, bidding collusion facilitates cooperation in reporting by increasing the value of having honest bureaucrats, generating a trade-off between collusion and corruption.
Keywords: bribes; cartels; corruption; freeriding; whistleblowing
JEL Codes: D44; D73; H57; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cooperation among honest suppliers (L14) | Increases the potential for collusion in bidding (D44) |
| Cooperation among suppliers in reporting corrupt bureaucrats (H57) | Increases the incentives to report corruption (H57) |
| Cooperation in reporting (P13) | Increases the expected collusive rent (D43) |
| Collusion in bidding (D44) | Enhances the benefits of reporting (G14) |
| Increased cooperation in reporting (F55) | Increases the expected collusive rent (D43) |