Is More Competition Always Better? An Experimental Study of Extortionary Corruption

Abstract

Using a laboratory experiment, we assess whether increasing competition among public officials reduces extortionary corruption. We find that increasing the number of providers has no effect on bribe demands when citizens' search costs are high, but it increases corruption when search costs are low. The effect is absent in a parallel setting framed as a standard market, which we attribute to citizens using a nonsequential search strategy as opposed to sequential search in the corruption setting. We conclude that efforts to reduce search costs, such as infrastructure investments, are preferable to anti‐corruption policies aimed at increasing the number of providers. (JEL D73, D49, C91)

Public sector reforms and their impact on the level of corruption: A systematic review

“…Among the latter, we found a strong prevalence of initiatives aimed at increasing transparency of information and at reducing the asymmetry of information available for both suppliers and consumers of public services. Introducing competition in public service delivery is addressed by two studies and proves to be effective in reducing extortionary bribery, but only if the costs that citizens have to bear for searching alternative providers for the same service can be reduced (e.g., lowering transportation costs or improving information sharing mechanisms) (Ryvkin & Serra, 2017).…”

A Strategy for Asymmetrical Measures to Reduce Bribery in Bangladesh

“…As Basu, Basu and Cordella (2016) showed that asymmetric punishment (expected penalties) controls or contributes to reducing bribery rates in the country. Moreover, several studies found that asymmetric punishment successfully reduces bribery incidents (Abbink et al, 2014;Ryvkin & Serra, 2017;Verma & Sengupta, 2015).…”

“…Basu argues that bribe-takers will hesitate to take bribes after knowing this, which helps "sharp decline in the incidence of harassment bribe". Verma and Sengupta (2015) found that Basu proposal of asymmetric penalty significantly reduces bribery incidents under Basu proposal of an asymmetric penalty scheme and found that the inability of the bribe-takers to react against the bribe-giver correlates with the reduction in bribery incidents (Ryvkin & Serra, 2017). In an endogenous environment, implementing Basu proposal produced mixed results; one, the policy could reduce welfare and another, it would reduce harassment and non-harassment bribes (Oak, 2015).…”

Experimental criminal law: a survey of contributions from law, economics, and criminology

“…Such behavior becomes less frequent if the interaction is framed as bribery (Banerjee 2016). It becomes more frequent if officials compete with each other (Ryvkin and Serra 2015). It is substantially reduced if the private person is not punished (Abbink, Dasgupta et al 2014).…”