A Market for Connections

Government or company decisions on whom to hire are mostly delegated to politicians, public sector officials or human resources and procurement managers. Due to anti-corruption laws, agents cannot sell contracts or positions that they are delegated to decide upon. Even if bribing is ruled out, those interested in the spoils may invest in a good relationship with the deciding agents in order to be remembered when the nomination is made. In this paper, we analyze such markets for connections in the presence of convex costs of networking.