This document discusses asymmetric punishment as a policy tool to control corruption. It presents a simple model of corruption involving bribery between public officials and citizens. It then analyzes the impact of implementing asymmetric punishment, where only public officials face punishment for accepting bribes. The analysis finds that asymmetric punishment may increase bribe sizes and fail to eliminate corruption when the cost of whistleblowing is high and effectiveness is low. It concludes that the success of this policy depends on parameters like fine sizes and whistleblowing costs and effectiveness, and a single policy may not work for all types of individuals and corrupt transactions.

1. Discussion:
Asymmetric Punishment as an Instrument of
Corruption Control
Jenny Simon (SITE)
August 31, 2015
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 1 / 7

2. A simple model of corruption
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

3. A simple model of corruption
A specific class of corruption: Harassment bribery
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

4. A simple model of corruption
A specific class of corruption: Harassment bribery
A specific policy instrument: Asymmetric punishment
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

5. A simple model of corruption
A specific class of corruption: Harassment bribery
A specific policy instrument: Asymmetric punishment
Endogenous detection probabilities (whistle blowing)
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

6. A simple model of corruption
A specific class of corruption: Harassment bribery
A specific policy instrument: Asymmetric punishment
Endogenous detection probabilities (whistle blowing)
Q: Is legalizing bribe giving a workable policy instrument?
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

7. A simple model of corruption
A specific class of corruption: Harassment bribery
A specific policy instrument: Asymmetric punishment
Endogenous detection probabilities (whistle blowing)
Q: Is legalizing bribe giving a workable policy instrument?
A: It depends...
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

8. A simple model of corruption
A specific class of corruption: Harassment bribery
A specific policy instrument: Asymmetric punishment
Endogenous detection probabilities (whistle blowing)
Q: Is legalizing bribe giving a workable policy instrument?
A: It depends...
on the size of the fine
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

9. A simple model of corruption
A specific class of corruption: Harassment bribery
A specific policy instrument: Asymmetric punishment
Endogenous detection probabilities (whistle blowing)
Q: Is legalizing bribe giving a workable policy instrument?
A: It depends...
on the size of the fine
on the cost and effectiveness of whistle blowing
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

10. A simple model of corruption
A specific class of corruption: Harassment bribery
A specific policy instrument: Asymmetric punishment
Endogenous detection probabilities (whistle blowing)
Q: Is legalizing bribe giving a workable policy instrument?
A: It depends...
on the size of the fine
on the cost and effectiveness of whistle blowing
Interesting: Bribes may increase in response to higher detection
probability or more asymmetry.
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7

11. When is cooperative bargaining the relevant concept?
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 3 / 7

12. When is cooperative bargaining the relevant concept?
Implications of NB solution:
implements the efficient solution
surplus shared equally
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 3 / 7

13. When is cooperative bargaining the relevant concept?
Implications of NB solution:
implements the efficient solution
surplus shared equally
Some results emerge because of this modeling choice:
bribe size increasing in asymmetry
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 3 / 7

14. When is cooperative bargaining the relevant concept?
Implications of NB solution:
implements the efficient solution
surplus shared equally
Some results emerge because of this modeling choice:
bribe size increasing in asymmetry
Makes welfare analysis hard
outcome can’t be rejected on efficiency grounds
(Why is corruption bad?)
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 3 / 7

15. When is cooperative bargaining the relevant concept?
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7

16. When is cooperative bargaining the relevant concept?
Low value cases (e.g. passports, doctor’s visits)
equal bargaining power unlikely
extortion seems more relevant (and there’s a literature)
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7

17. When is cooperative bargaining the relevant concept?
Low value cases (e.g. passports, doctor’s visits)
equal bargaining power unlikely
extortion seems more relevant (and there’s a literature)
→ NB probably not so relevant
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7

18. When is cooperative bargaining the relevant concept?
Low value cases (e.g. passports, doctor’s visits)
equal bargaining power unlikely
extortion seems more relevant (and there’s a literature)
→ NB probably not so relevant
High value cases (e.g. building licenses/assessment of quality)
longer term relationships, higher stakes, probably competition
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7

19. When is cooperative bargaining the relevant concept?
Low value cases (e.g. passports, doctor’s visits)
equal bargaining power unlikely
extortion seems more relevant (and there’s a literature)
→ NB probably not so relevant
High value cases (e.g. building licenses/assessment of quality)
longer term relationships, higher stakes, probably competition
→ NB more relevant
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7

20. High value cases - Does the model fit reality?
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 5 / 7

21. High value cases - Does the model fit reality?
Contract enforcable?
delay between bribe and delivery, hold-up
no legal protection obv, so needs to be self-enforcing, trust
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 5 / 7

22. High value cases - Does the model fit reality?
Contract enforcable?
delay between bribe and delivery, hold-up
no legal protection obv, so needs to be self-enforcing, trust
Suggestion 1: Consider a dynamic game
Are contracts self-enforcing?
Repeated interaction: Retaliation, Reputation
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 5 / 7

23. High value cases - Does the model fit reality?
Contract enforcable?
delay between bribe and delivery, hold-up
no legal protection obv, so needs to be self-enforcing, trust
Suggestion 1: Consider a dynamic game
Are contracts self-enforcing?
Repeated interaction: Retaliation, Reputation
Suggestion 2: Consider very severe punishment (e.g. job loss)
and rewards for whistle blowing
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 5 / 7

24. Which Policy Lessons to Draw?
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7

25. Which Policy Lessons to Draw?
Non-monotone outcome:
Asymmetry may increase the bribe size and fail to eliminate bribery
when the cost of blowing the whistle is high and the effectiveness
relatively low.
So it’s important to pick the policy just right, depending on
parameters
Pick a schedule of fines and effort levels for detection for different
values of corrupt transactions
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7

26. Which Policy Lessons to Draw?
Non-monotone outcome:
Asymmetry may increase the bribe size and fail to eliminate bribery
when the cost of blowing the whistle is high and the effectiveness
relatively low.
So it’s important to pick the policy just right, depending on
parameters
Pick a schedule of fines and effort levels for detection for different
values of corrupt transactions
What if these parameters aren’t characteristics of the
environment, but rather the individuals that meet?
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7

27. Which Policy Lessons to Draw?
Non-monotone outcome:
Asymmetry may increase the bribe size and fail to eliminate bribery
when the cost of blowing the whistle is high and the effectiveness
relatively low.
So it’s important to pick the policy just right, depending on
parameters
Pick a schedule of fines and effort levels for detection for different
values of corrupt transactions
What if these parameters aren’t characteristics of the
environment, but rather the individuals that meet?
→ Then we design a policy that works for some part of the
distribution, but not others.
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7

28. Which Policy Lessons to Draw?
Non-monotone outcome:
Asymmetry may increase the bribe size and fail to eliminate bribery
when the cost of blowing the whistle is high and the effectiveness
relatively low.
So it’s important to pick the policy just right, depending on
parameters
Pick a schedule of fines and effort levels for detection for different
values of corrupt transactions
What if these parameters aren’t characteristics of the
environment, but rather the individuals that meet?
→ Then we design a policy that works for some part of the
distribution, but not others.
→ In particular: Imagine poorer people cannot achieve the same
effectiveness when reporting bribery. Then the same policy that
eliminates bribes among the richer makes the poorer worse off
(have to pay even higher bribes)
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7

29. Thank you!
Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 7 / 7