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«Bribes For Faster Delivery Amal Sanyal Lincoln University, New Zealand and Instituto de Analisis Economico, UAB, Barcelona Abstract: The paper models ...»

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→∞ →0.7887 →0.0000 Proposition 3: In relation to the potentially achievable minimum, the average waiting time for residual buyers improves rapidly with the introduction of the first few competitors. Marginal gains fall as more competitors are introduced.

The optimal number of suppliers can be established if the principal has a valuation function to convert residual buyers’ waiting time into monetary costs. Let w be the wage per period per supplier, and α a measure of cost per unit of average waiting time for residual buyers. Then the principal’s objective would be to minimize (νw +α.dnν). Note that Yν* increases with ν and the function [(1-Y)2]/ν2 + Y/ν falls with ν. Therefore dnν dn,ν-1 for all ν. Assume that w α(dn1-dn2), ie the gain in going from one supplier to two exceeds the extra wage cost. Then the procedure for locating the optimal ν is to increase the number of suppliers from ν-1 to ν until the inequality w α(dn,ν−1-dn,ν) ceases to hold.

5. Concluding Remarks Preceding sections highlight the difficulty of controlling supply line bribes in openly corrupt environments. If control is attempted through supervision, the solution most likely to work is frequent turnover of supervisors. This would presumably require significant resource in hiring and training.

However, even this solution is subverted if the supervisor can pre-commit to accepting a bribe from the agent. The possibility of pre-committing is made difficult by shortening the tenure of the supervisor but it can not be ruled out. The second type of solution explored in the paper is through introducing multiple agents. Though in this case the proportion of consumers affected by bribes may not come down significantly, the fall in the average wait of residual buyers and that of the bribe rate can be counted as gains.

These theoretical solutions however are often unworkable for factors not modeled in our paper. Supply queue corruption is generally prevalent in public bodies, where the authority to employ a supervisor or more agents is situated outside the jurisdiction of the principal at the local level. Therefore a local principal, when she wants to restrain corruption, finds herself wanting in resource and/or jurisdiction. In opposite cases when the higher authorities get interested, the principal at the local level may in fact try to protect corrupt practices. In this situation, a bribe chain operates from the agent to the local principal via

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the supervisor, if employed. There are also situations where a third party protects corruption in the supply of several essential services in a particular locality. The third party involved is often the local boss or muscleman, who gets a share of the bribes. In other instances, they are local politicians who use their control of the corrupt process to selectively favor clients in 'getting things done'. Local bosses or politicians can thwart effective supervision by arranging and underwriting the pre-commitment of supervisors that we referred to in section 3. In other instances, local politicians with a reach at higher levels of the government can simply stop a reform attempt at inception.

REFERENCES

Bac, M, 1996, Corruption and Supervision Costs in Hierarchies, Journal of Comparative Economics, XXII, pp 99-118.

Bag, P.K, 1997, Controlling Corruption in Hierarchies, Journal of Comparative Economics, XXV, pp 322-344.

Gabszewicz, J.J and J.F. Thisse, 1986, On the Nature of Competition with Differentiated Products, The Economic Journal, IVX, pp 160-72.

Kornai, Ja'nos, 1975, Anti- Equilibrium, Springer-Verlag, New York.

Malinvaud, E, 1977, The Theory of Unemployment Reconsidered, Basil Blackwell, Oxford.

Marjit, Sugata and Mukherjee, Arijit, 1997, Theory of harassment and corruption, Journal of Financial Management & Analysis, X, pp 81-84 Samuelson, P. A, 1958, Foundations of Economic Analysis, Harvard University Press, Cambridge, Massachussets.

Sanyal, Amal, 2000, Audit Hierarchy in a Corrupt Tax Administration, Journal of Comparative Economics, XXVIII, pp 364-78.

Scitovsky, T, 1942, The Political Economy of Consumers' Rationing, Review of Economic Statistics, XXIV, pp 114-124.

Tirole, Jean, 1986, Hierarchies and Bureaucracies: On the Role of Collusion in Organizations. Journal of Law, Economics and Organization. II, pp 181-214.

Tirole, Jean, 1992, Collusion and the Theory of Organizations, in Laffont, Jean-Jacques, Ed., Advances in Economic Theory, Sixth World Congress, Vol. II, Econometric Society Monographs, No.21, pp 151-206. Cambridge, UK: Cambridge University Press, 1992.

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