How corruptible are you? Bribery under uncertainty

We model corruption in a society as a result of bargaining for bribes between private citizens and public officials. We investigate the role that incomplete information with respect to the intrinsic moral cost of one's potential corruption partner plays out in his or her propensity to engage in bribery, and, consequently, the equilibrium level of corruption in the society. We assume that the cost of engaging in corruption is subject to strategic complementarities, which may lead to multiple corruption equilibria. We find that corruption is lowest when potential bribers and potential bribees are uncertain regarding each other's “corruptibility” and have asymmetric bargaining powers. Our uncertainty result provides theoretical support in favor of anti-corruption strategies, such as staff rotation in public offices, aimed at decreasing the social closeness of bribers and bribees. Our bargaining power result suggests that, under uncertainty, monopolistic public good provision has the same corruption-reducing effect as competitive public good provision.

► We model corruption in a society as a result of bargaining for bribes between private citizens and public officials. ► The extrinsic cost of engaging in corruption is subject to strategic complementarities, which lead to multiple corruption equilibria. ► Corruption is lowest when potential bribers and potential bribees are uncertain regarding each other′s “corruptibility” and have asymmetric bargaining powers.