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Nov. 2nd, 2015 01:12 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
timeletsI wonder how corruption affects a regulated industry that has a major player (M), e.g. Aeropflot, and a bunch of minor players (S), e.g. Metrojet. Does the corruption change monopolistic tendencies in the industry?
Let's say, we have a corrupt industry (C) and non-corrupt industry (N). In a corrupt environment (C), the major player (M) has the scale advantage because it has more turnover/capital and "административный ресурс" to resist corruption. Therefore, it has low regulated maintenance costs (per plane) and carries no corruption costs. (M may further reduce maintenance costs by influencing government regulations. But because M is also regulated by non-corrupt international bodies, it can't reduce the costs below a certain required minimal value).
A minor player S has high maintenance costs and non-zero corruption costs. Therefore, it may choose to finance corruption by reducing maintenance costs below the required safety threshold.
How would customers behave when they use services provided by a corrupt industry? I bet there will be a self-selection process where better-off customers choose M, rather than S. It's quite possible that a race to the bottom ensues among minor players.
Let's say, we have a corrupt industry (C) and non-corrupt industry (N). In a corrupt environment (C), the major player (M) has the scale advantage because it has more turnover/capital and "административный ресурс" to resist corruption. Therefore, it has low regulated maintenance costs (per plane) and carries no corruption costs. (M may further reduce maintenance costs by influencing government regulations. But because M is also regulated by non-corrupt international bodies, it can't reduce the costs below a certain required minimal value).
A minor player S has high maintenance costs and non-zero corruption costs. Therefore, it may choose to finance corruption by reducing maintenance costs below the required safety threshold.
How would customers behave when they use services provided by a corrupt industry? I bet there will be a self-selection process where better-off customers choose M, rather than S. It's quite possible that a race to the bottom ensues among minor players.
