Deterrence and constrained enforcement: Alternative regimes to deal with bribery

This study embeds transaction cost analysis into a Law and Economics model to produce general recommendations on how to deter bribery. Governments may deter bribery either by high penalties and risks of detection, potentially supported by leniency given to those who report their infraction (deterrence regime). Another local optimum is achieved if the government amplifies the risk of opportunism, aggravating the difficulties of enforcing a bribe transaction. This involves a low probability of detection and allowing offenders to keep their ill-gotten gains. If bribes are paid upfront bribe taking will face only mild punishment (constrained enforcement regime).