upper and lower bounds of put and call option value stochastic dominance approach applying stochastic dominance rules with borrowing and lending at the risk free interest rate we derive upper and lower values for an option price for all unconstrained utility functions and alternatively for concave utility functions the derivation of these bounds is quite general and fits any kind of stock price distribution as long as it is characterized by a nonnegative beta transaction costs and taxes can be easily incorporated in the model presented here since investors are not required to revise their portfolios continuously the price that is paid for this generalization is that a range of values rather than a unique value is obtained in the last decade there has been an increasing interest in the options market by both academicians and practitioners the most well known valuation models are the black scholes 4 model the jump stochastic process model see cox and ross 6 the binomial model see cox ross and rubinstein 7 rendleman and bartler 19 and sharpe 22 and rubinstein s discrete model 21 recently perrakis and ryan 18 using rubinstein s approach have derived upper and lower bounds for option prices the relative pricing theory of contingent claims differs in the continuous time and discrete time models in a continuous time framework the instantaneous expected rate of return of the option and that of the underlying stock must follow a certain market equilibrium condition in this case the equilibrium condition is easily determined by a continuous hedging strategy in the discrete time case there is no hedging strategy to provide a simple relationship between the option and the stock price however for a given value distribution of the stock the value distribution of the option is uniquely determined by the option exercise price and this suggests some possible relationships between the stock and option values

the choice between market failures and corruption because government intervention transfers resources from one party to another it creates room for corruption as corruption often undermines the purpose of the intervention governments will try to prevent it they may create rents for bureaucrats induce a misallocation of resources and increase the size of the bureaucracy since preventing all corruption is excessively costly second best intervention may involve a certain fraction of bureaucrats accepting bribes when corruption is harder to prevent there may be both more bureaucrats and higher public sector wages also the optimal degree of government intervention may be nonmonotonic in the level of income

the role of wages and auditing during a crackdown on corruption in the city of buenos aires abstract we study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of buenos aires argentina during 1996 97 we find a well defined negative effect on the measures used to capture corruption prices paid by hospitals for basic homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown after this period prices increase but they are still 10 percent lower than those prevailing before the crackdown relative to the precrackdown period higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal during the first phase of the crackdown but have a negative and well defined effect when audit intensity takes intermediate levels the last phase of the crackdown controlling for fixed effects we find that the wage elasticity of input prices exceeds 20 these results are consistent with the standard model of bribes of gary becker and george stigler

on option pricing bounds the purpose of this article is to compare the perrakis and ryan bounds of option prices in a single period model with option bounds derived using linear programming it is shown that the upper bounds are identical but that the lower bounds are different a comparison of these bounds together with merton s bounds and the black scholes prices in a lognormal securities market is presented the black scholes 1 option pricing model is preference free its simplicity derives from the continuous trading assumption which enables a portfolio of stock and bonds to be constructed so as to replicate the payouts of the option in an incomplete market with only finite opportunities to revise portfolios no preference free option price can be constructed 3 6 for this case preferencedependent prices can be established rather than place restrictive assumptions on preferences perrakis and ryan pr 5 have recently derived upper and lower bounds for a single and multiple period call option price the development of these bounds is based on the single price law and arbitrage arguments and requires modest assumptions on preferences the bounds exist as equilibrium values given a consensus on stock price distributions in this article we shall develop bounds for option prices based on primitive prices in incomplete markets and compare these bounds to the single period bounds derived by perrakis and ryan towards this goal we first review the pricing approach for primitive securities and proceed to re express the pr bounds as derived from their arbitrage portfolios then using linear programming bounds on option prices are derived linear programming approaches for obtaining relationships among option prices have been investigated garman 2 for example established an algebra for evaluating hedge portfolios using this algebra a one period linear program can be established that provides a way to search for arbitrage opportunities over an infinite number of portfolio strategies one of the features of the algebra is that only one linear program need be solved to determine if riskless arbitrage strategies can be established by investigating the dual of the linear program garman obtained necessary and sufficient conditions for rational option pricing in a one period setting these bounds were shown to be consistent with the bounds determined by merton 4 unlike garman s approach the linear programming approach presented here places constraints on time preferences risk aversion and state probabilities under specific sets of assumptions linear programs are formulated where the objective function to be optimized is the call price minimization and maximi

decreasing absolute risk aversion and option pricing bounds in this paper efficient bounds for the price of a call option are obtained using the decreasing absolute risk aversion dara dominance rule such lower and upper bounds are obtained minimizing and maximizing respectively the objective function of a nonlinear optimization problem an explicit formula related to an exponential utility function is given for the special case of three states of nature a large number of experiments have been carried out and the numerical results support the conjecture that the same formula holds for problems with a number of states n 3 moreover dara bounds are more efficient than the bounds obtained using different criteria

corruption investments and contributions to public goods experimental evidence from rural liberia we analyze how corruption affects incentives to invest or contribute to public goods we obtain a proxy for corruption among liberian community leaders by keeping track of a flow of inputs associated with a development intervention measuring these inputs before and after giving them in custody to the chief we then use the gap between these measurements missing inputs to explain variation in investment behavior of villagers investment behavior is gauged with two simple artefactual field experiments our main results are that corruption i undermines incentives for voluntary contributions to local public goods and ii may reduce private investments of individuals subject to rent seeking by the chief in real life we also provide weaker evidence that the impact of corruption on investments and contributions to public goods is heterogeneous this impact may be gender specific and appears to vary with accessibility of communities

legal standards enforcement and corruption stricter laws require more incisive and costlier enforcement because enforcement activity depends both on available tax revenue and the honesty of officials the optimal legal standard of a benevolent government is increasing in per capita income and decreasing in officials corruption in contrast to the tollbooth view of regulation the standard chosen by a self interested government is a non monotonic function of officials corruption and can be either lower or higher than that chosen by a benevolent regulator international evidence on environmental regulation shows that standards correlate positively with per capita income and negatively with corruption consistent with the model s predictions for benevolent governments jel d73 k42 l51

incentives for unaware agents the paper introduces the problem of unawareness into principalagent theory and discusses optimal incentive contracts when the agent may be unaware of her action space depending on the agent s default behavior it can be optimal for the principal to propose an incomplete contract that keeps the agent unaware or a complete contract the key tradeoff is that of enlarging the agent s choice set versus adding costly incentive constraints if agents differ in their unawareness optimal contracts show a self reinforcing pattern if there are few unaware agents in the economy optimal contracts promote awareness if unawareness is wide spread optimal contracts shroud the contracting environment thus keeping the agent unaware

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

an equilibrium queuing model of bribery it is sometimes argued that bribery is inefficient because bureaucrats may cause delays for attracting more bribes this hypothesis is examined in the context of a queue where customers having different values of time are ranked by their bribe payments to the queue s server the nash equilibrium strategies of the customers are derived it is shown that the server is unlikely to slow down the allocation process when bribery is allowed the model does not have stringent informational requirements and the equilibrium outcome minimizes the average value of time costs of the queue it also suggests a useful auctioning procedure

active and passive waste in government spending evidence from a policy experiment we propose a distinction between active and passive waste as determinants of the cost of public services active waste entails utility for the public decision maker whereas passive waste does not we analyze purchases of standardized goods by italian public bodies and exploit a policy experiment associated with a national procurement agency we find that i some public bodies pay systematically more than others for equivalent goods ii differences are correlated with governance structure iii the variation in prices is principally due to variation in passive rather than active waste and iv passive waste accounts for 83 percent of total estimated waste

ethical spillovers in firms evidence from vehicle emissions testing in this paper we explore how organizations influence the unethical behavior of their employees using a unique data set of over three million vehicle emissions tests we find strong evidence of ethical spillovers from firms to individuals when inspectors work across different organizations they adjust the rate at which they pass vehicles to the norms of those with whom they work these spillovers are strongest at large facilities and corporate chains and weakest for the large volume inspectors these results are consistent with the economics literature on productivity spillovers from organizations and peers and suggest that managers can influence the ethics of employee behavior through both formal norms and incentives the results also suggest that employees have persistent ethics that limit the magnitude of this influence these results imply that if ethical conformity is important to the financial and legal health of the organization managers must be vigilant in their hiring training and monitoring to ensure that employee behavior is consistent with firm objectives

pervasive shortages under socialism we present a new theory of pervasive shortages under socialism based on the assumption that the planners are self interested because the planners meaning bureaucrats in the ministries and managers offirms cannot keep the official profits that firms earn it is in their interest to create shortages of output and to collect bribes from consumers the theory implies that 1 an increase in the official price of a good might reduce output 2 market socialism is bound to fail even without computational complexities facing the planners and 3 price liberalization will succeed only iffirms get to keep their profits

moral hazard renegotiation and forgetfulness when a principal and an agent operate with simple contracts in equilibrium renegotiation will occur after the agent takes her action since renegotiation makes incentive contracts non credible the principal may prefer non renegotiable monitoring options the current literature does not fully reconcile these predictions with the observation of simple non renegotiated incentive contracts we model a principal agent interaction in a social learning framework and assume that when renegotiation is not observed agents may forget its feasibility with infinitesimal probability in the unique stable state of our model renegotiation occurs with infinitesimal frequency and second best simple incentive contracts appear with non negligible frequency

can the west save africa in the new millennium the western aid effort toward africa has surged due to writ ings by well known economists a celebrity mass advocacy campaign and decisions by western leaders to make africa a major foreign policy priority this survey contrasts the predominant transformational approach west comprehensively saves africa to occasional swings to a marginal approach west takes one small step at a time to help individual africans evaluation of one step at a time initiatives is generally easier than that of transformational ones either through controlled experiments although these have been oversold or simple case studies where it is easier to attribute outcomes to actions we see two themes emerge from the literature survey 1 escalation as each successive western transformational effort has yielded disappointing results as judged at least by stylized facts since again the econometrics are shaky the response has been to try an even more ambitious effort and 2 the cycle of ideas rather than a progressive testing and discarding of failed ideas we see a cycle in aid ideas in many areas in africa with ideas going out of fashion only to come back again later after some lapse long enough to forget the previous disappointing experience both escalation and cyclicality of ideas are symptomatic of the lack of learning that seems to be characteristic of the transfor mational approach in contrast the marginal approach has had some successes in improving the well being of individual africans such as the dramatic fall in mortality

institutional corruption and election fraud evidence from a field experiment in afghanistan w e investigate the relationship between political networks weak institutions and election fraud during the 2010 parliamentary election in afghanistan combining i data on political connections between candidates and election officials ii a nationwide controlled evaluation of a novel monitoring technology and iii direct measurements of aggregation fraud we find considerable evidence of aggregation fraud in favor of connected candidates and that the announcement of a new monitoring technology reduced theft of election materials by about 60 percent and vote counts for connected candidates by about 25 percent the results have implications for electoral competition and are potentially actionable for policymakers jel c93 d02 d72 k42 o17

crime intimidation and whistleblowing a theory of inference from unverifiable reports we consider a game between a principal an agent and a monitor in which the principal would like to rely on messages by the monitor the potential whistleblower to target intervention against a misbehaving agent the difficulty is that the agent can credibly threaten to retaliate against the monitor in the event of an intervention in this setting intervention policies that are responsive to the monitor s message provide informative signals to the agent which can be used to target threats efficiently principals that are too responsive to information shut down communication channels successful intervention policies must therefore garble the information provided by monitors and cannot be fully responsive we show that policy evaluation on the basis of non verifiable whistleblower messages is feasible under arbitrary incomplete information provided policy design takes into account that messages are endogenous

obtaining a driver s license in india an experimental approach to studying corruption we conduct two experiments to understand the process of obtaining a driver s license in india in the first experiment we randomly assign license candidates to one of three groups bonus offered a financial reward if they could obtain their license fast lesson offered free driving lessons upfront and control the control group alone illustrates bureaucratic failures 71 of the license getters in that group avoided the mandated driving test and 62 failed a surprise driving test the system responds to private needs there are more license getters in the bonus group but at a social cost there are more license getters who cannot drive in the bonus group the system however also appears to respond to social considerations as there are more license getters in the lesson group large extra legal payments are made by license getters those in the control group pay 2 5 times the official fee more of these extra legal payments take place in the bonus group surprisingly these extra legal payments are not direct bribes to bureaucrats but instead payments to agents in the second experiment we perform an audit study to better understand the role of agents the audit shows that agents can provide licenses to individuals even if they cannot drive but the audit also shows that agents cannot as easily circumvent all other rules we argue that our findings are most consistent with agents being the channel for corruption in this system we also report some suggestive evidence that bureaucrats create red tape possibly to induce more license candidates to use agents

distributional effects of corruption when enforcement is biased theory and evidence from bribery in schools in bangladesh in many models of corruption where enforcement is unbiased and the official maximizes her income the rich are more likely to pay bribes for their children s education implying that corruption reduces educational inequality we develop models of bribery that reflect the fact that in developing countries anti corruption enforcement is not unbiased and higher income of a household is associated with higher bargaining power and better quality of institutions in models of biased enforcement the rich are less likely to pay bribes making bribery regressive the ols estimates of the effects of household income are likely to find spurious progressivity in the incidence of bribery in schools we exploit temporary rainfall shocks to identify the ability to pay effect while long term rainfall differences identify the combined poor people and poor area effects the iv estimates show that the poor are more likely to pay bribes and the amount paid does not depend on household income the evidence rejects the ability to pay and related models based on unbiased enforcement and is consistent with the refusal to pay model of bargaining power where the rich decline to pay bribes free schooling is free only for the rich and corruption makes the playing field skewed against the poor

tax rates and tax evasion evidence from missing imports in china tax evasion by its very nature is difficult to observe we quantify the effects of tax rates on tax evasion by examining the relationship in china between the tariff schedule and the evasion gap which we define as the difference between hong kong s reported exports to china at the product level and china s reported imports from hong kong our results imply that a one percentage point increase in the tax rate is associated with a 3 percent increase in evasion furthermore the evasion gap is negatively correlated with tax rates on closely related products suggesting that evasion takes place partly through misclassification of imports from higher taxed categories to lower taxed ones in addition to underreporting the value of imports

eight questions about corruption this paper will discuss eight frequently asked questions about public corruption 1 what is corruption 2 which countries are the most corrupt 3 what are the common characteristics of countries with high corruption 4 what is the magnitude of corruption 5 do higher wages for bureaucrats reduce corruption 6 can competition reduce corruption 7 why have there been so few recent successful attempts to fight corruption 8 does corruption adversely affect growth

option pricing bounds in discrete time upper and lower bounds are derived for call options traded at discrete intervals these bounds are independent of assumptions on the stock price distribution other than a restriction satisfied by the stock being non negative beta the development of the bounds relies on the single price law and arbitrage arguments both single period and multiperiod results are produced and put option bounds follow by extension the bounds exist as equilibrium values given a consensus on stock price distribution they are also valid for empirical studies being adjustable for dividends and commissions following the impetus of the black scholes pricing model the majority of option analyses have been in continuous time such approaches have relied on the formation of perfect riskless hedges involving the option its underlying security and a riskless asset since the hedge must be continuously revised and maintained while actual trading opportunities are discrete this crucial assumption limits the accuracy and applicability of the black scholes and related formulae in fact the black scholes formula can only be considered as a valid approximation to the discrete time solution merton 8 p 663 while the closeness of that approximation has not been ascertained in general 1 earlier discrete models such as boness 3 and samuelson 12 have been succeeded by those of brennan 5 cox et al 6 and rubinstein 11 in which distributional restrictions are imposed on share returns usually the discrete formula converges to the black scholes expression under appropriate limit conditions using the rubinstein 11 approach we derive upper and lower bounds for option prices with both a general price distribution and discrete trading opportunities the bounds are functions of the share and exercise prices the riskless rate of interest the distribution of the share price change per period and the number of periods of expiration of the option the lower bound is tighter than that of merton 7 derived from more general arbitrage considerations while being less exact than the results already mentioned for restricted distributions

the system of administrative and political corruption canal irrigation in south india the paper describes how some irrigation engineers raise vast amounts of illicit revenue from the distribution of water and contracts and redistribute part to superior officers and politicians it argues that the corruption system which is centred on control of personnel transfers is an important supply side reason for poor performance of canal irrigated agriculture insofar as the same system operates in other government departments it may be more important for understanding indian politics and the political influences on economic development than has previously been realised

a controlled field experiment on corruption abstract this paper reports on a controlled field experiment on corruption designed to address two important issues the experimenter s scrutiny and the unobservability of corruption in the experiment a grader is offered a bribe along with a demand for a better grade we find that graders respond more favorably to bigger bribes while the effect of higher wages is ambiguous it lowers the bribe s acceptance but it fosters reciprocation monitoring and punishment can deter corruption but we cannot reject that it may also crowd out intrinsic motivations for honesty when intensified finally our results suggest several micro determinants of corruption including age ability religiosity but not gender

balancing priorities aligning interests developing mitigation capacity in china and india debates about how to respond to climate change have largely focused on the difficulties in agreeing on national targets for reducing greenhouse gas emissions by assuming that the main obstacle to

a theory of misgovernance this paper tries to explain why government bureaucracies are often associated with red tape corruption and lack of incentives the paper identifies two specific ingredients that together can provide an explanation the fact that governments often act precisely in situations where markets fail and the presence of agency problems within the government we show that these problems are exacerbated at low levels of development and in bureaucracies dealing with poor people we also argue that we need to posit the existence of a welfare oriented constituency within the government in order to explain red tape and corruption

bribery behavioral drivers of distorted decisions we experimentally investigate behavioral drivers of bribery focusing on the role of self interest reciprocity and moral costs associated with distorting judgment in our laboratory experiment two participants compete for a prize a referee picks the winner participants can bribe the referee when the referee can keep only the winner s bribe bribes distort her judgment when the referee keeps the bribes regardless of the winner bribes no longer influence her decision an experiment in an indian market confirms these results these findings imply that our participants are influenced by bribes out of self interest and not because of a desire to reciprocate further evidence shows that self interest guides decisions to a greater extent when referees have scope for avoiding the moral costs associated with distorting judgment as a result limiting referees ability to form self serving evaluations can significantly reduce the effectiveness of bribes less

limited contract enforcement and strategic renegotiation this paper presents a strategic theory of contract renegotiation in this theory suboptimal contracts are put in place initially to protect one party against undesirable a ctions by another party and are renegotiated once the danger is past the authors develop a model to establish the cases in which simple contracts cannot achieve desirable outcomes so that only a complicated contract or renegotiation will serve unlike most previous accounts of contract renegotiation this theory does not rely on exogenous uncertainty to motivate renegotiation copyright 1988 by american economic association

the impact of corruption on consumer markets evidence from the allocation of second generation wireless spectrum in india abstracttheoretical predictions of the impact of corruption on economic efficiency are ambiguous with models allowing for positive negative or neutral effects while much evidence exists on levels of corruption less is available on its impact particularly its impacts on consumer markets this paper investigates empirically the effect of the corrupt sale of spectrum licenses to ineligible firms on the wireless telecommunications market in india i find that the corrupt allocation had at worst no impact on the number of subscribers prices usage revenues competition and measures of quality i argue that the market based transfer of licenses to competent firms other than the original awardees combined with fierce competition in the telecommunications sector may have mitigated potential deleterious impacts of corruption on consumers these results suggest that the original corrupt allocation did not matter which provides support for the coase theorem

fighting corruption to improve schooling evidence from a newspaper campaign in uganda what are the most effective ways to increase primary school enrollment and student learning we argue that innovations in governance of social services may yield the highest return since social service delivery in developing countries is often plagued by inefficiencies and corruption we illustrate this by using data from an unusual policy experiment a newspaper campaign in uganda aimed at reducing capture of public funds by providing schools parents with information to monitor local officials handling of a large education grant program the campaign was highly successful and the reduction in capture had a positive effect on enrollment and student learning jel d73 i22 o12

propensities to engage in and punish corrupt behavior experimental evidence from australia india indonesia and singapore abstract this paper examines cultural differences in individual decision making in a corruption game we define culture as an individual s accumulated experience shaped by the social institutional and economic aspects of the environment in which the individual lives based on experiments run in australia melbourne india delhi indonesia jakarta and singapore we find that there is a greater variation in the propensities to punish corrupt behavior than in the propensities to engage in corrupt behavior across cultures consistent with the existing corruption indices the subjects in india exhibit a higher tolerance of corruption than the subjects in australia however the subjects in singapore have a higher tolerance and the subjects in indonesia have much lower tolerance of corruption than expected we conjecture that this is due to the nature of the recent institutional changes in these two countries we also vary our experimental design to examine the impact of the perceived cost of bribery and find that the results are culture specific

taxation and corruption theory and firm level evidence from uganda this article develops a simple framework to analyse the negotiation over bribe and tax payments during the tax collection process we show that the larger the bribe a firm offers to a tax collector the larger the tax rebate it gets more particularly we show that the negotiation over bribe and tax payments hinges on four other factors firms official liabilities detection firms negotiation power and red tape costs imposed on firms some of the predictions from the theoretical model are tested using firm level data from uganda we find that bribe and tax payments are inversely related thereby supporting the hypothesis of a negotiation taking place between firms and tax collectors in particular a 1 point increase in average bribe payments per employee is associated with a 7 point reduction in average amount of tax payments per employee results are robust to various instruments dealing with the endogenous relationship between bribes and taxes

measuring corruption in china an expenditure based approach using household survey data most existing micro level empirical analyses of corruption rely on administrative records special purpose surveys or field experiments which can be difficult or very costly to obtain in some situations in this paper we apply an expenditure based method of quantifying the extent of corruption in a particular country using household survey data this method utilizes discrepancies between consumption and reported income to measure corruption another contribution of this paper is that it provides the first objective estimate of the extent of corruption in china we use a quadratic clothing expenditure function to estimate the extent of corruption in china in 2002

electoral accountability and corruption evidence from the audits of local governments we show that political institutions affect corruption levels we use audit reports in brazil to construct new measures of political cor ruption in local governments and test whether electoral account ability affects the corruption practices of incumbent politicians we find significantly less corruption in municipalities where mayors can get reelected mayors with reelection incentives misappropriate 27 percent fewer resources than mayors without reelection incentives these effects are more pronounced among municipalities with less access to information and where the likelihood of judicial punish ment is lower overall our findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician s corrupt behavior jel d72 k42 017

the marginal rate of corruption in public programs evidence from india abstract optimal fiscal policy depends on the marginal benefits of public spending in developing countries corrupt officials often embezzle funds so optimal policy should reflect marginal corruption we analyze marginal corruption in the context of a statutory wage increase in india s employment guarantee scheme strikingly workers received none of the increase even though initially they were on average overpaid the data are inconsistent with theories of voice in which the threat of complaints limits corruption but consistent with theories of exit in which outside options in the private sector limit how much rent officials can extract

legalizing bribe giving i introduction corruption remains an endemic problem in the developing world and has become a central political issue in many countries empirical work has considerably advanced our understanding of how widespread corruption is and how it can cause harm 1 governments and agencies such as the world bank have sponsored numerous anticorruption programs however regarding how to best fight corruption in practice research has lagged behind policy 2 recently kaushik basu chief economist then of the indian government and now of the world bank proposed a specific approach in basu s 2011 pamphlet why for a class of bribes the act of giving a bribe should be treated as legal he describes a society where bribery is rampant a scourge that deserves to be banished and proposes for the case of harassment bribes that people pay to get services they are legally entitled to 3 the following policy legalize bribe giving double the fine for bribe taking and make the bribe taker pay back the bribe if discovered when a citizen bribes a bureaucrat under traditional law the two become partners in crime they thus lack incentives to report the activity under basu s policy bp which he deems fairly radical incentives are provided for the bribe giver to report the bribe taker if this is foreseen the bureaucrat would not accept the bribe in the first place that is the key idea will it work a hot debate has raged in indian and international press the economist appeared sympathetic 4 however in some quarters the proposal stirred outrage and commentators discarded it mainly on moral grounds 5 more tempered thoughtful criticism has come from economists dreze 2011 in particular wrote a penetrating comment arguing that basu does not give adequate attention to some institutional and moral concerns which may change conclusions basu s intriguing presentation is informal as is the heated debate it inspired perhaps one should not expect the issues to be easily settled through such discourse the proposal is reminiscent of somewhat analogous tools used in other fields such as leniency policies in antitrust and whistleblower protection and reward schemes against fraud and organized crime scholars who studied those measures have suggested they may be effective if well designed and administered but counterproductive if details are not set right 6 deeper understanding of the pros and cons of subtle legal rules may require careful scrutiny within a formal model in section ii we develop a simple formal model to represent the scenarios basu and his commentators care about as explicit games by comparing equilibria we draw conclusions regarding the conditions under which bp is likely to be effective bp gets mixed context dependent grades and we highlight complementarities with other policies the proposal works best if coupled with measures that increase the costs for bureaucrats of denying citizens what they deserve and that reduce the costs for citizens of getting justice verifying whether a bribe was paid entails costs which may deter reporting hence bp works better against larger bribes inefficient or corrupt law enforcement increases these costs so bp will be more effective if it is part of a wider reform package that also fosters independence and accountability of the legal system in section iii we take into account also the legal and moral considerations brought up by dreze revealing other problems related to bp we propose a modified policy mbp that escapes many objections the idea is inspired by leniency rules in antitrust rather than legalize bribe giving only those who report having paid a bribe would be awarded legal immunity extortionary harassment bribes are distortive when they are not paid because a justified and presumably welfare enhancing licence is then not issued with other arguably often more serious forms of corruption distortions occur when bribes are paid not otherwise

a review of edward luce s in spite of the gods the strange rise of modern india india poses a development puzzle on a grand scale sixty years of electoral democ racy thirty years of rapid growth and a number of world class institutions such as the institutes of technology or election commission have led to talk of india as a superpower in a league with the united states and china yet on many fronts india s indicators of human well being e g malnutrition immunization are at or below those of much poorer sub saharan african countries measures of the administrative capacity of the state on basics like attendance performance and corruption reveal a potentially flailing state whose brilliantly formulated policies are disconnected from realities on the ground this review essay of ed luce s in spite of the gods attempts to articulate the puzzle that is modern india and pose questions about the development trajectory of a country whose fortunes will shape our century

wealth health and health services in rural rajasthan what are the determinants of health and of well being income and wealth are clearly part of the story but does access to health care have a large independent effect as the advocates of more investment in health care such as the world health organization s commission on macroeconomics and health commission on macroeconomics and health 2001 have argued this paper reports on a recent survey in a poor rural area of the state of rajasthan in india intended to shed some light on this issue where there was an attempt to use a set of interlocking surveys to collect data on health and economic status as well as the public and private provision of health care

samurai accountant a theory of auditing and plunder a risk neutral principal wishes to exact a payment from a risk neutral agent whose wealth he does not know but may verify through a costly auditing procedure we characterize efficient schemes for the principal when he is allowed to choose schedules for preaudit and postaudit payments and audit probabilities subject to the constraint that only monetary incentives can be used and that the principal may never make a net payment to the agent the main results are that efficient schemes involve preaudit payments which are increasing in the agent s wealth audit probabilities are decreasing in the agent s wealth and also satisfy certain constraints as equalities in general such schemes involve stochastic auditing and rebates after an audit in this paper we analyse the problem of a principal extracting wealth from an agent who is reluctant to part with it and is also better informed than the principal as to the amount he owns we assume that the principal has a costly means of discovering the agent s

on the equality of two lower bounds on the call price a note this note shows that appearances to the contrary the lower bounds on the price of a call option obtained by levy and by ritchken are identical and that this common bound is never inferior to the lower bound obtained by perrakis and ryan