Corruption in procurement and public purchase

The paper studies capture and extortion in public purchase. It shows that capture yields a dead-weight loss while extortion does not. Based on the calibration of the model, the total cost of capture is between 1.2 and 2.88 times the amount of the bribes. The theoretical analysis focuses on capture fight. The legal framework that emerges from the normative analysis involves open tender for larger purchases and no monitoring for the smaller ones. The rule is independent of a country's characteristics. Large public purchases should hence be ruled by international legislation. For markets of medium range, national legislation differs. When susceptibility to corruption rises, there is a shift from the capture to the extortion regime. (c) 2006 Elsevier B.V All rights reserved.