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Abstract

This paper seeks to investigate the interaction between favoritism and allocative efficiency. The issue of whether corruption distorts allocative efficiency in a bribery game under a pre-existing environment of alleged favoritism is considered. It is demonstrated that if there is no unambiguous favoritism, observed favoritism in bribery game may disrupt allocative efficiency. A bribery game under corruption and favoritism is developed. The model and some possible equilibria are discussed. A simple numerical example from Lebanon is also presented.

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