Effects on Efficiency - 4

This also suggests the problem with
looking upon bribes simply as side payments
in a Coasean bargaining process
between officials or politicians and
firms (even apart from the agency problem
that the bribee is not representing
the interests of the principal, the public).
Of course, the briber and the
bribee may fail to agree on the appropriate
size of the bribe on account of
bargaining in a situation of asymmetric
information and also, there are collective
action problems when several firms
have to get together to bribe a single
politician or bureaucrat. But more important
than these is the fact, emphasized
by Maxim Boycko, Shleifer, and
Robert Vishny (1995), that corruption
contracts are not enforceable in courts
and there is many a slip between the
bribing transaction and the actual delivery
of the good or the service involved.
The control rights on the latter are
often arbitrary and uncertain, leaving a
lot of leeway for the bribee to renege
on his understanding with the briber, or
to come back and demand another
bribe. (It used to be said of General
Noriega of Panama in his heyday that
he could not be bought, he could only
be rented.) Of course, the bribee may
have to worry about his reputation in
the long run about keeping promises
(but many corrupt politicians have too
short a time horizon), or sometimes the
briber can hire hoodlums to discipline
the bribee (but the transaction costs for
such ways of enforcement can be high).