Question
Suppose a tax inspector has discovered an instance of tax evasion by a hypothetical company XYZ and is preparing a preliminary report for the management.
Suppose a tax inspector has discovered an instance of tax evasion by a hypothetical company "XYZ" and is preparing a preliminary report for the management. The tax evasion is illegal and if the inspector discloses this information, company "XYZ" must pay fines up to $250,000. In order to avoid this penalty, company "XYZ" is planning to bribe (b) the inspector. The current monthly wage of the tax inspector (w) is $7753 . The detection probability of accepting the bribe for him (p) is (8)%. The potential punishment in case the inspector is caught while committing corruption (v) is one year in prison and 3 years expulsion from service.
Calculate the amount of bribe at which the agent is likely to get involved in corruption.
Discuss two main factors that may cause corruption in this situation.
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