Using Supply, Demand, and the Cournot Model to Understand Corruption

The author combines the supply and demand model of taxes with a Cournot model of bribe takers to develop a simple and useful framework for understanding the effect of corruption on economic activity. There are many examples of corruption in both developed and developing countries. Because corruption decreases the level of economic activity and seems more common in developing countries, it is likely to be part of the explanation of the wide disparity of income between rich and poor countries. The model presented could be used in courses on microeconomics, economic growth, public finance, political economy, and economic development.