Strategic analysis of influence peddling

This paper analyzes ‘influence peddling’ in a model that portrays interactions involving human capital transfer and collusion‐building, in which each government official regulates multiple firms simultaneously. We show that there exists a collusion maximizing equilibrium between a sequence of ‘qualified’ regulators and a firm such that the qualified bureaucrat manipulates regulation rates for two firms by regulating the colluding firm leniently for the maximized sum of their payoffs, but regulating the non‐colluding firm stringently for the signaling in order to ‘compensate’ for the lenient regulatory stance taken toward the colluding firm.