Abstract
We present the results of a laboratory bribery experiment in which two bidders compete for a contract and make offers to an employee of a firm which can be accompanied by a bribe. The employee then decides who to award the contract to. The roles of both bidders and the employee are played by subjects in the laboratory. We test whether different probabilities of a bribe being discovered influence the honesty of a contract placing. In a further treatment we investigate the effect of the possibility of cooperating with the authority (principal witness) in combination with a leniency policy in the form of a reduced fine for the all players who cooperate with the authorities. We find that the presence of a leniency policy reduces the number of bribes offered, but at the same time makes the bribes that are offered more profitable for corrupt bidders who earn more, especially under the principal witness condition.
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Notes
A recent discussion about the broad range of various types of risks can be found in Baule and Fandel (2016).
An extended abstract on this experiment was previously published in the Operations Research Proceedings 2012 (Christöfl et al. 2014). For this publication, we conducted additional experimental sessions increasing the sample size from 120 to 180 participants and substantially extended the analysis.
Following these 8 rounds, another experiment followed which we will not report in this paper.
For B 1 and B 2, the following restrictions are valid: (1) The offer o consisting of the official price p i and the unofficial bribe b i cannot be larger than the budget v:p i + b i ≤ v (2) The official price p i of the project (without bribe b i ) must exceed the costs c:p i – b i ≥ c (3) Therefore the official price p i lies between the costs c and the budget v:c ≤ p i ≤ v (4) The unofficial part (namely the bribe) cannot be larger than the official price p i and therefore b i ≤ p i is assumed.
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Christöfl, A., Leopold-Wildburger, U. & Rasmußen, A. An experimental study on bribes, detection probability and principal witness policy. J Bus Econ 87, 1067–1081 (2017). https://doi.org/10.1007/s11573-017-0846-8
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DOI: https://doi.org/10.1007/s11573-017-0846-8
Keywords
- Corruption
- Contract placing
- Detection probability
- Principal witness
- Cooperation with authorities
- Leniency policy
- Experimental study