|Reduce Corruption by Coordinating Extortionists|
|Key Words||Bribery, extortion, monopoly, elasticity.|
|News Story||Two economists have discovered that extortionists in developing countries behave like economists. Is that a good thing?
The researchers traveled with truck drivers over two main roads in Indonesia and systematically recorded the bribes that took place over the 400-mile long trip. What they discovered is that those seeking bribes act as their own little monopolies at the checkpoints.
The researchers went on 304 trips and recorded over 6,000 bribes. At the twenty-seven different checkpoints along the route, the drivers paid an average total of US$23. What makes this study interesting is that at the beginning of the route, little discussion took place, and the truck drivers simply handed over cigarettes or a few cents to the guards. But as the drivers got closer and closer to the destination, the guards began demanding more money, money that the drivers did not feel comfortable complaining about, fearing the loss of their cargo the closer they were to their destination.
After civil unrest in the region fell, the number of checkpoints fell by half. Seeing this, the researchers felt that they had a wonderful opportunity to look at changes in bribery that took place. As the number of checkpoints fell, the total amount of bribes paid out fell, but only by about 36%. Fewer bribes were taking place, but the amounts given at each were increasing.
This offers evidence that the checkpoint guards were acting as their own monopolies, independent of the actions of others. They sought to capture their own share of the increased surplus of funds of the truck drivers, and in doing so, maximized their own revenue. However, they may have been better off coordinating bribes - colluding as a single entity. Rather than decentralizing the bribery, and increasing the total number of payment, coordination would at least reduce the number of bribes, and potentially reduce the amount paid by the truck drivers. That's an interesting way of eliminating a problem.
|Source||"Rules of the Road," The Economist. May 3, 2007.|
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