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An experimental study on bribes, detection probability and principal witness policy

Alexandra Christöfl, Ulrike Leopold-Wildburger () and Arleta Rasmußen
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Alexandra Christöfl: University of Graz
Ulrike Leopold-Wildburger: University of Graz
Arleta Rasmußen: University of Graz

Journal of Business Economics, 2017, vol. 87, issue 8, 1067-1081

Abstract: 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.

Keywords: Corruption; Contract placing; Detection probability; Principal witness; Cooperation with authorities; Leniency policy; Experimental study (search for similar items in EconPapers)
JEL-codes: C91 D64 K42 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:spr:jbecon:v:87:y:2017:i:8:d:10.1007_s11573-017-0846-8