In this theoretical analysis, the"principal"can be the head of the tax collection agency (or"government"or even citizens), the"supervisor"can be the tax collector, and the"agent"can be the taxpayer. The principal, interested in controlling an agent's socially costly activity ("cheating"), hires...

Some corruption of employees will exist when managers are constrained in setting rewards and penalties. Attempts to reduce corruption need to address these constraints. Raising salaries without raising expected penalties will have higher costs than benefits