When Competition Corrupts: A Theoretical Analysis of Market Structure and the Incidence of Corruption
10 Pages Posted: 20 Apr 2016
Date Written: September 1, 2013
The paper develops a simple model to demonstrate that, paradoxically, greater competition may exacerbate the problem of corruption. Market participants engaging in corrupt practices enjoy lower production costs -- maybe because they pay a bribe to avoid installing the environmental safeguards required by law -- such that honest players are driven out of the market when the market becomes sufficiently competitive.
Keywords: Public Sector Corruption & Anticorruption Measures, Water and Industry, Markets and Market Access, Gender and Law, Microfinance
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