Seminar 11 question/answers

Seminar 11 question/answers

1. 
   Suppose a road traffic police officer has discovered an instance of a violation of traffic rules by the driver and is preparing a report. If the traffic police officer takes action, the driver must pay fines up to $600. In order to avoid this penalty, the driver is planning to bribe (b) the officer. The current monthly wage of officer (w) is $300. The detection probability of accepting the bribe for him (p) is 5%. The potential punishment in case the officer is caught while committing corruption (v) is 3 years expulsion from service. Calculate the amount of bribe at which the agent is likely to get involved in corruption.
   

2. 
   What are the main determinants of corruption? (Read the lecture slides)
   
3. 
   What is the relationship between corruption and economic performance? Discuss. (Read the lecture slides)