Strategic Analysis of Influence Peddling

Abstract

This paper analyzes "Influence Peddling" with interaction between human capital transfer and collusion-building aspects in a model, in which each government official regulates multiple firms simultaneously. We show that (i) there exists an "optimal" division rule for collusion between a sequence of "qualified" regulators and a firm; (ii) as the regulators increasingly benefit from the collusion, they strictly decrease regulation rates for the firm under collusion while strictly increasing regulation rates for a firm not under collusion; and (iii) post-government-employment restrictions are not "effective" policies, and an alternative policy can be suggested.