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MECHANISM AND IMPACTS OF EMBEZZLEMENT IN A DUOPOLISTIC MARKET *
Author(s) -
CAI DAPENG,
LI JIE
Publication year - 2011
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2011.00406.x
Subject(s) - embezzlement , order (exchange) , business , revenue , oligopoly , distortion (music) , microeconomics , economics , finance , cournot competition , criminal law , sociology , engineering , amplifier , criminology , cmos , electronic engineering
We consider the case in which a corruptible manager contemplates to embezzle his/her firm's revenues by overstating the production costs in a duopolistic market. In order to embezzle more, the manager chooses to increase the firm's output. This partially corrects the market failures associated with the oligopoly distortion. Nevertheless, pervasive and large‐scale embezzlement is detrimental and should be addressed, although moderate embezzlement might be socially good. We also consider how the length of tenure affects the manager's behaviours: extending the tenure cannot eradicate embezzlement, and an insufficient rise of the reward rate may only defer embezzlement.