Institutional Corruption and Incentive Compatibility

Abstract

Many instances of institutional corruption have at their core incentive systems that are not incentive compatible. Consequently, individuals within the institution behave in ways that are contrary to the core mission and values of the institution, resulting in a failure of the institution to accomplish its mission and a loss of public trust. This paper explores the links between incentive compatibility and institutional corruption, and suggests ways to mitigate institutional corruption by reforming the incentive structures within institutions.