Lobbying and Corruption Dr James Tremewan - - PowerPoint PPT Presentation

Lobbying and Corruption

Dr James Tremewan (james.tremewan@univie.ac.at) Bribery: Greed vs Reciprocity

”Transfers” to politicians

• In the Tullock and common agency models, firms ”invest” in
• lobbying. In both models this can be considered as making

transfers to politicians (in the Tullock model the investment could also represent costs of research or transmitting information

• see next week’s slides).
• What forms do these transfers take?
• Campaign contributions (legal, within limits).
• Implicit agreement to hire politician in the future (a.k.a

”revolving door”: dodgy, but hard to prove).

• Outright bribes (illegal).
• With lobbying and corruption it is typically impossible to write

legally binding contracts (e.g. campaign contributions become an illegal bribe if there is an explicit agreement).

• If the transfer takes place first (Tullock model), why should the

politician do the firm wants? If the policy decision is made first (common agency model), why should the firm pay?

2/10

Reputation or Reciprocity

• Firms and politicians do appear to make good on their (implicit)

promises, e.g.:

• 37% of Obama’s ambassadorial nominees went to major donors

(US$500,000+) to his 2012 campaign.1

• Chairman of US government committee regulating

pharmaceutical helps pass legislation favouring drug companies, then retires to take up US$2 million+ position in pharmaceutical lobbying group.2

• Why?
• Reciprocity: social preferences.
• Reputation: want to appear honest in hope of future transfers

(can be modeled explicitly).

1http://www.washingtontimes.com/news/2014/feb/12/obamas-

ambassador-picks-turn-into-embarrassment

2http://usatoday30.usatoday.com/money/industries/health/drugs/2004-

12-15-drugs-usat x.htm

3/10

Bribery: Greed versus Reciprocity3

• This paper looks at an experiment where two workers compete

for a prize and can bribe the judge (one-shot, so reputation not an issue here).

• Bribery game:
• Both workers perform task.
• Both workers simultaneously select a bribe of up to $5.
• Two treatments:
• KeepWinner: Judge gives $10 to worker judged to have best

work, and keeps only the winner’s bribe (the loser pays nothing)

• like common agency model.
• KeepBoth: Judge gives $10 to worker judged to have best work,

and keeps both bribes - like Tullock model.

• If reciprocity is main motivation, prize should be awarded to

worker with the highest bribe in both treatments. If greed is more important, judge has no incentive to award prize based on the bribes in KeepBoth treatment.

3by Uri Gneezy, Silvia Saccardo, and Roel van Veldhuizen.

4/10

Bribery: Greed versus Reciprocity

• Task: writing a joke about economists (then one about

psychologists).

• Jokes are independently rated by other subjects for an impartial

measure of funniness. Only contests where there was ”sufficient agreement” that one joke was substantially funnier than the

• ther were used for analysis.

5/10

Results: size of bribes

6/10

Results: size of bribes

7/10

Objective treatment

• Like KeepWinner, but task is to correctly identify colour of

words.

• Judges shown dots on screen representing number of words

correctly identified by each worker, and has to count them to decide winner (some ”moral wiggle room” as counting takes some effort, and ”mistakes” can be made).

8/10

Results: Objective treatment

9/10

Conclusions

• In KeepWinner, judges favour the worker who gave the higher

bribe.

• In KeepBoth, judges favour the worker did the best work.
• Greed more important here than reciprocity.
• Workers anticipate this by giving lower bribes in KeepBoth

treatment (in context of Tullock model, they correctly believe that R is low).

• Bribes less important relative to quality in the objective

treatment:

• Assume ”moral cost” of giving the worse worker the prize is

independent of the task.

• In subjective (joke) treatment it is easier than in the objective

treatment to fool yourself into thinking the worker with the biggest bribe is actually the best.

• Large bribes appear to change judges beliefs about the quality
• f the jokes!

10/10