Incentive mechanism for a sustainable public distribution system

Purpose: Government distributing rationed goods through a public distribution system often do not reach the deserving citizens primarily due to the practice of corruption. This paper aims to design an incentive mechanism to curtail such corrupt practices. Design/methodology/approach: The incentive mechanism is developed in a principal-agent framework where the information asymmetry is in the form of moral hazard. Findings: The mechanism designed through this study sufficiently penalizes the agent who receives bribe and incentivizes if desired level of effort is applied. Originality/value: The paper contributes to the existing literature by developing an incentive mechanism to prevent bureaucratic corruption. Appropriate wages are also quantified in this study.