How to fight corruption: Carrots and sticks

I present a model of corruption with incomplete information where the bureaucrat may request a bribe from the citizen for providing a service. I show that corruption is detrimental to social welfare and consider a new policy to prevent it. I propose punishing bureaucrats who take bribes and rewarding citizens who report such cases. Neither punishment nor rewards can prevent corruption alone. However, the proper combination of punishment and rewards completely prevents corruption. I also show that higher bureaucracy increases corruption in equilibrium and makes it harder to combat it.