Corruption and intermediaries - A game theoretical approach

Abstract

The aim of the article is to examine a bribee-initiated corrupt transaction and the role of intermediaries in such a transaction, using a game theoretical model. Corrupt officers, who want to obtain a bribe from the public services they offer, use their power to increase red tape to enforce clients to pay a bribe. However, if the officer demands a bribe directly from the clients, they face the risk of demanding a bribe from a "whistleblower" client, who has high ethical values and complains to the law enforcement authority about every bribe demand from her. Thus, public officers may prefer using intermediaries to decrease the risk of being complained about and suffering penalties. I examine cases with and without intermediaries in such a scenario and then compare the results of the two. In the case where there is no intermediary, in some situations the risks involved may be so large that the officer may prefer not to demand a bribe. On the other hand, in the cases with intermediaries, the detection risk is reduced, so taking a bribe is nearly always more profitable for the officer. Based on the model’s results, policy suggestions for corruption prevention are made.