Economic Equilibriums in the Presence of Informal Institutions

A model of a partial equilibrium in the economy of distribution of a public good with two types of agents (officials and firms) is presented and analyzed in this paper. These agents compete for a limited state good, but the nature of this competition and its results vary depending on the institutional framework. Four variations of the model were examined: a model in the absence of the informal institutions, a model with blat, a model with corruption, and a model with blat and corruption. A step-by-step analysis of each of the model specifications allows us to draw conclusions about the ways in which various factors affect the equilibrium distribution of benefits in the economy. Particularly, blat and corruption lead to an uneven distribution of benefits in the society, the government measures to combat corruption do not always lead to a decrease in the level of corruption, while blat and corruption act as substitutes for each other.