Bribes in a Supply Line

Abstract

The paper examines the practice of charging bribes for faster delivery of a good or a service. A model is developed for a market where a public provider sells a good or service at an announced price through a delivery agent, and the latter extracts bribes to allow customers to jump the queue.The equilibrium bribe rate and waiting time for customers is first analyzed. Then we explore the possibility of curbing this practice by supervision.It is shown that if supervisors are also corruptible, then this practice can not be curbed through a fine and reward scheme. The reason is that while bribe taking can often produce tangible evidence, generally there would be no hard evidence for the reduction of its incidence or elimination. It is then shown that the bribe rate can be reduced by increasing the number of delivery agents, and the increase in consumer surplus through this measure exceeds the additional wage cost of employing extra delivery agents.

Keywords: queues, corruption, bribes, optimal mechanism, public distribution, developing economies, transitional economies

JEL Classification: H8, D45