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Bribery and Endogenous Monitoring Effort: An Experimental Study

Aaron Lowen () and Andrew Samuel
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Andrew Samuel: Department of Economics, Loyola University – Maryland, Baltimore, MD, USA

Eastern Economic Journal, 2012, vol. 38, issue 3, 356-380

Abstract: We present the findings of an experimental game of bribery based on Mookherjee and Png's model where inspectors are hired to find evidence against firm owners who have violated some regulation. Inspectors choose costly effort that determines the probability of finding evidence and allows them to fine the owner. Bribes may occur before or after the inspector has exerted effort and found evidence. Inspectors consistently demanded bribes below the Nash equilibrium prediction and exerted effort below the payoff-maximizing level. These results raise questions about the robustness of theoretical results regarding the efficiency of using bribes to motivate inspections.

Date: 2012
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Handle: RePEc:pal:easeco:v:38:y:2012:i:3:p:356-380