Corruption in Entry Regulation: A Game-theoretic Analysis with a Track of Bureaucrats

In this paper, we analyze the corruption in entry regulation that involves an entrepreneur and a track of bureaucrats. Instead of formulating a game in extensive form to analyze the sequential nature of the process involved in the application for a permit, we focus on the corruption in entry regulations that involves both entrepreneur and multiple bureaucrats to negotiate simultaneously for bribes from the mechanism design perspectives. Our results are the following: First, because of the asymmetry of information, the entrepreneur might not obtain the required permit, although collectively as a group, the joint net payoff of the entrepreneur and the bureaucrats is positive. Second, the entrepreneur might pay the bribes without getting the permit.