‘I Gave You More’: Discretionary Power in a Corruption Experiment

Bribes are gifts that are given with an expectation of favourable treatment from a public official or an authority figure. In some cultures, gift giving is a widely accepted part of social interaction and the rejection of gifts may be frowned upon. The purpose of this article is to investigate whether and how the (in)ability to reject gifts/bribes impacts corrupt behaviour. We present the results of an economic experiment in which two agents (firms) are competing for governmental funds. The firms may choose to bribe a public official, who is responsible for distributing the funds. We find that if there is an option to reject bribes, then the average funds allocated to the bribers are lower than in case there is no such option. This holds regardless of whether the bribe was, in fact, accepted or rejected. We also find that if the bribe was rejected, the bribers receive less governmental funds on average. Our results shed some light on the persistence of corruption in cultures in which giving gifts and expecting gifts in return is a deeply rooted custom. Prevalence of this practice in the social context spills over into the business context and leads to higher corruption levels, and more economic distortion than when bribing is just a form of business transaction. JEL: D01, D02, D73, D90