Corrupt officials exact money from firms. Corruption affects the number of firms in a free entry equilibrium. The degree of deep competition in the economy increases with lower overhead costs relative to profits; and with a tendency towards similar cost structures. Increases in competition may not lower corruption, so that the effect on welfare is uncertain. The model explains why a rational corrupt official may extinguish the source of his bribe income by causing a firm to exit, and how and when increasing product market competition may limit the adverse effects of corruption on industrial variety.