Abstract
This paper examines the role of auctioneers’ payoff structure in determining (a) their willingness to solicit bribes in exchange for an auctioned item, (b) their preference over soliciting a bribe from an auction’s highest- or lowest-bidder, and (c) the likelihood an auction is won by its highest-bidder. I conduct an auction experiment with bribery in which auctioneers’ net-of-bribes payoffs are not fixed, but depend on the size of the winning bid. Bribery reduces the probability of victory of highest-bidders and average winning bids. When auctioneers’ payoffs are highly dependent on winning bids they are less likely to solicit a bribe and more likely to choose the highest-bidder when soliciting one. These results indicate that aligning auctioneers’ personal profit-maximization objectives with the desired outcome of the auction mechanism reduces the likelihood and negative effects of bribery in auctions.
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