Bribery and Public Procurement: An Experimental Study

A procurement contract is granted by a bureaucrat (the auction-eer) who is interested in a low price and a bribe from the provider. The optimal bids and bribes are derived based on an iid private cost assumption. In the experiment, bribes are negatively framed (between-subjects treatment) to capture that society is better off if bribes are rare or low. Although bids are lower than predicted, behavior is qual-itatively in line with the linear equilibrium prediction. When bribes generate a negative externality, there is a significant increase in the variability of the data