Corruption-free scheme of entering into contract: mathematical model

TL;DR

This paper develops a mathematical model to analyze and prevent corruption in contract negotiations between principals, agents, and producers, proposing optimal non-corruption resource distribution schemes.

Contribution

It introduces a formalized mathematical framework for modeling corruption in contracts, including conditions for corruption emergence and strategies for corruption-free interactions.

Findings

Optimal corruption-free resource distribution schemes identified

Conditions under which corruption emerges are formulated

Numerical examples demonstrate corruption-free agent behavior

Abstract

The main purpose of this paper is to formalize the modelling process, analysis and mathematical definition of corruption when entering into a contract between principal agent and producers. The formulation of the problem and the definition of concepts for the general case are considered. For definiteness, all calculations and formulas are given for the case of three producers, one principal agent and one intermediary. Economic analysis of corruption allowed building a mathematical model of interaction between agents. Financial resources distribution problem in a contract with a corrupted intermediary is considered.Then proposed conditions for corruption emergence and its possible consequences. Optimal non-corruption schemes of financial resources distribution in a contract are formed, when principal agent's choice is limited first only by asymmetrical information and then also by external influences.Numerical examples suggesting optimal corruption-free agents' behaviour are presented.