Corruption and Stooges in Procurement.

This article theoretically examines the role of stooges—middlemen used by sellers to bribe a corruptible buying agent—in procurement auctions and their impact on procurement efficiency and design. It finds that while delegation to stooges can sometimes reduce inefficiency by increasing the joint expected loss from detected corruption for sellers and stooges, an equilibrium where both competing sellers delegate does not exist due to contractual frictions such as limited liability and the costs of incentivizing stooges. The buying firm can mitigate inefficiencies by optimally setting reserve prices and designing incentive schemes for its agent, which can eliminate corruption or ensure the high-quality product wins. The study also highlights that common anti-corruption policies, such as banning stooges or intensifying prosecution, may be ineffective or counterproductive depending on the context. These insights extend to other settings involving agents susceptible to bribery, such as media buying and lobbying, emphasizing the nuanced strategic role of intermediaries in corrupt procurement processes.