Audience and Other-Regarding Effects in an Experimental Auction With Bribery

Abstract

We report results from an experimental set up in which two firms compete in an auction to win the license for a public project, submitting sealed offers regarding the project’s quality and a bribe to the public official deciding. We study the role of an agent (citizen) who is either a mere observer or is passively affected by the quality of the winning project. Experimental data reveal that the existence of a citizen affected by the winning project significantly reduces bribes, while a citizen who only observes the auction results in higher pro-social behaviour from public officials.