ABSTRACT
This chapter focuses on public contracting procedures, each phase of which can create occasions for corruption, orienting competition between firms toward a dimension of hidden exchange with politicians and bureaucrats. It shows that how political corruption facilitates the construction of cartels. The chapter examines the relation between political protection and extortion. It explores typology of the varying forms of organization of relations between firms and centers of political power. The chapter also shows that lessen the "moral costs" of engaging in corruption on the part of entrepreneurs will be analyzed. It analyzes some of the perverse consequences of corruption on the "demand side" of the market of corruption, particularly referring to the adverse selection of firms and the higher prices paid by public entities. In economic systems where private demand is of relatively greater importance, on the other hand, entrepreneurs can oppose unwelcome demands for payoffs with fewer consequences.
