Signaling corruption through conspicuous consumption
Date
2021-12
Authors
Zarate, Pablo Daniel
relationships.isContributorOfPublication
Ruzzier, Christian
Journal Title
Journal ISSN
Volume Title
Publisher
Universidad de San Andrés. Departamento de Economía
Abstract
Public officers suspected of corruption are often seen consuming conspicuously luxury goods.
Since this raises public awareness about them, it can backfire and lead to an investigation that
eventually finds them guilty of corruption. One plausible explanation to rationalize this
behavior is that, by signaling their willingness to be corrupt, they can attract the pool of corrupt
firms and get higher bribes. In this work, we consider a public procurement setting where the
government delegates a supervisor to run the process. If the signaling cost is low enough, then
there exists a separating equilibrium where the supervisor signals his type and obtains a higher
bribe. Even when the government fixes a budget constraint or maximum price before assigning
a supervisor, a signaling equilibrium can still exist, but with a lower reserve price than socially
optimal. Therefore, even though the government can reduce the bribe revenues, corruption and
signaling can result in aggregate welfare loss.
Description
Fil: Zarate, Pablo Daniel. Universidad de San Andrés. Departamento de Economía; Argentina.
Keywords
Citation
Zarate, P. D. (2021). Signaling corruption through conspicuous consumption. [Tesis de maestría, Universidad de San Andrés. Departamento de Economía]. Repositorio Digital San Andrés. http://hdl.handle.net/10908/18972