Red tape, incentive bribe and the provision of subsidy

An agent entitled to receive subsidy bribes the government official to redu ce red tape from an exogenous level, Tile agent has private information on his cost from red tape. Which type of the agent, high or low cost, would be able to exploit the private information depends on the level of the exogen ous red tape. At low levels of the exogenous red tape, it is the high type, and at high levels it is the low type that earns information rent. At mode rate red tape, neither may earn rents, With greater red tape, the agent's p rofit can increase. (C) 2001 Published by Elsevier Science B,V.