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Delegation and Rewards

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  • Vetter, Stefan

Abstract

We study experimentally whether anti-corruption policies with a focus on bribery might be insufficient to uncover more subtle ways of gaining an unfair advantage. In particular, we investigate whether an implicit agreement to exchange favors between a decision-maker and a lobbying party serves as a legal substitute for corruption. Due to the obvious lack of field data on these activities, the laboratory provides an excellent opportunity to study this question. We find that even the pure anticipation of future rewards from a lobbying party suffices to bias a decision-maker in favor of this party, even though it creates negative externalities to others. Although future rewards are not contractible, the benefitting party voluntarily compensates decision-makers for partisan choices. In this way, both receive higher payoffs, but aggregate welfare is lower than without a rewards channel. Thus, the outcome mirrors what might have been achieved via conventional bribing, while not being illegal.

Suggested Citation

  • Vetter, Stefan, 2012. "Delegation and Rewards," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 378, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:378
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    File URL: https://epub.ub.uni-muenchen.de/13176/1/378.pdf
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    References listed on IDEAS

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    1. Gary Charness & Ramon Cobo-Reyes & Natalia Jimenez & Juan A. Lacomba & Francisco Lagos, 2012. "The Hidden Advantage of Delegation: Pareto Improvements in a Gift Exchange Game," American Economic Review, American Economic Association, vol. 102(5), pages 2358-2379, August.
    2. Susanne Büchner & Andreas Freytag & Luis González & Werner Güth, 2008. "Bribery and public procurement: an experimental study," Public Choice, Springer, vol. 137(1), pages 103-117, October.
    3. Potters, Jan & van Winden, Frans, 2000. "Professionals and students in a lobbying experiment: Professional rules of conduct and subject surrogacy," Journal of Economic Behavior & Organization, Elsevier, vol. 43(4), pages 499-522, December.
    4. Klaus Abbink & Bernd Irlenbusch & Elke Renner, 2002. "An Experimental Bribery Game," Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(2), pages 428-454, October.
    5. Lambsdorff, Johann Graf & Frank, Björn, 2010. "Bribing versus gift-giving - An experiment," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 347-357, June.
    6. Klaus Abbink & Heike Hennig-Schmidt, 2006. "Neutral versus loaded instructions in a bribery experiment," Experimental Economics, Springer;Economic Science Association, vol. 9(2), pages 103-121, June.
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    8. Fershtman, Chaim & Gneezy, Uri, 2001. "Strategic Delegation: An Experiment," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 352-368, Summer.
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    12. Luis Gonzalez & Werner Güth & Maria Vittoria Levati, "undated". "Speeding up Bureaucrats by Greasing Them - An Experimental Study -," Papers on Strategic Interaction 2002-05, Max Planck Institute of Economics, Strategic Interaction Group.
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    More about this item

    Keywords

    delegation; gift exchange; corruption; lobbying; negative externalities;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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