Delegation and Rewards

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.