Impact of Corruption on Utility Prices: A Theoretical and Empirical Analysis for the Electricity Markets

This study investigates the influence of corruption on utility prices. We develop a game-theoretical model to explore the interactions between the government, an interest group formed by firms, and consumers in determining utility prices. The model suggests that an increase in corruption correlates with a rise in utility prices, a relationship confirmed through empirical analysis of electricity sectors in 21 OECD countries from 1995 to 2015. Additionally, we explore the effects of regulatory reforms on electricity prices, revealing mixed outcomes. The findings emphasise the importance of anti-corruption efforts in shaping fair utility prices.