Bribery and efficiency

In this paper we experimentally test two questions about bribery. The first question is whether there is more bribery in a situation with excessive regulation than in a situation with optimal regulation. The second question is whether the existence bribery leads to higher efficiency when there is excessive regulation and bribes can be used to restore efficiency. Our experimental results show that there are more bribes in the bribery model with excessive taxes than in the bribery model with optimal taxes. This difference decreases gradually over time. The experimental results also provide a non affirmativeanswer to the second question. In the bribery model with excessive taxes subjects use bribes not only to restore efficiency but also to free ride on others. As a consequence, the resulting efficiency levels are not only far from the social optimal that could be achieved, but also lower than the level that would be if there were no bribes.

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