Essential characteristics of corruption are (1) reciprocity relationships between bribers and public officials, (2) negative welfare effects, and (3) high penalties when discovered. We separate the influences of these factors in an experiment. In a two-player game, reciprocation is economically inefficient through negative externalities. A control treatment without externalities is also conducted. In a third, so-called sudden death treatment, corrupt pairs face a low probability of exclusion from the experiment without payment. The results show that reciprocity can establish bribery relationships, where negative externalities have no apparent effect. The penalty threat significantly reduces corruption, although discovery probabilities are typically underestimated.
|Number of pages||27|
|Journal||Journal of Law, Economics, and Organization|
|Publication status||Published - 1 Oct 2002|