We consider a procurement problem in which the procurement agent is supposed to allocate the realization of a project according to a competitive mechanism that values bids in terms of the proposed price and quality.
Potential bidders have private information about their production costs.
Since the procurement agent is also in charge of verifying delivered quality, in exchange for a bribe, he can allow an arbitrary firm to be awarded the realization of the project and to produce a quality level lower than the announced. We identify the effects that influence the equilibrium level of corruption and show that, contrary to conventional wisdom, corruption may well be increasing in competition.