Essays on Corruption, Leniency Programmes and Delegation

This thesis explores two topics. Chapter 1 evaluates leniency programmes in light of crime and corruption. Chapters 2 and 3 explore the issue of delegation of authority in the presence of non-contractible costs. In chapter 1, we evaluate Leniency Programmes (LPs): forgiving self-reporting criminals, in a society of heterogeneous criminals and heterogeneous bureaucrats. Social welfare goes up immediately after the LP is introduced as supply (size and composition of bureaucrats) is held fixed. In the intermediate run, some bureaucrats leave the agency because they lose a source of income (bribe) causing a dip in the welfare. However, we observe that welfare can go up in the long run. Chapter 2 focuses on delegation of authority using a principal-agent model. Agents have private information (signals) relevant for making a correct decision. Agents and principal incur non-contractible costs if a wrong decision is made. We characterize truth-telling equilibria. Among other cases, we see what happens when agents have asymmetrical non-contractible costs and the principal also incurs a non-contractible cost. Our main result is that there are situations where the principal delegates the decision making authority to the agent whom she is less aligned with in terms of preferences (non-irrelevancy) provided there is a sufficient degree of information asymmetry between the two agents. Chapter 3 extends the analysis of chapter 2 to situations where truth-telling equilibria does not exist. Information is not aggregated efficiently under non truth-telling because of the incentive constraints of the agents. We show that the non irrelevancy result arises in this chapter when the signal precisions of the two agents are equal.