Humanitarian Aid Management under Corruptible Distribution and Oversight Agents

Problem Definition: In many crisis contexts, such as armed conflicts, natural disasters, or refugee emergencies, one of the most pressing challenges is to regulate the delivery of humanitarian aid to the final beneficiaries in the presence of both corruptible agents (those responsible for delivering aid) and corruptible inspectors (who may be bribed not to report uncovered misappropriations). Strengthening anti-corruption efforts by hiring more inspectors and/or rewarding inspectors’ truthful reporting can reduce corruption but draws on the finite humanitarian aid financing, reducing the aid delivered to the beneficiaries. Methodology/Results: We develop a three-stage game-theoretic model in which a government agency chooses inspection intensity and the reward rate for inspectors’ truthful reporting, managers decide how much aid to misappropriate, and inspectors decide whether to report detected misconduct or accept a bribe to conceal misappropriation. The government agency aims to maximize the amount of humanitarian aid reaching the beneficiaries. We find that the role of inspectors depends on the financing available. When the financing is low, inspectors serve to detect misconduct; when the financing is sufficiently high, inspectors also affect managers' behavior and deter misappropriation. The reward can also serve two purposes. It can either induce truthful reporting and eliminate bribery, or increase the bribe that managers must pay, thereby reducing their incentive to misappropriate. We characterize the impact of key parameters on the optimal anti-corruption levers. Managerial Implications: Our results provide guidance for agencies and donors on how to balance aid provision with anti-corruption measures, and how to adjust inspection intensity and incentive for truthful reporting to maximize the amount of aid reaching its intended recipients. As financing changes, resources should be allocated toward adjusting inspection intensity. In contrast, the reward rate for truthful reporting should be calibrated to the enforcement environment, and not be mechanically increased with the amount of financing.