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Competition, regulation and bribery
Author(s) -
Beck Paul J.,
Maher Michael W.
Publication year - 1989
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090100102
Subject(s) - competition (biology) , business , foreign corrupt practices act , disadvantage , government (linguistics) , database transaction , language change , purchasing , transaction cost , economics , industrial organization , public economics , microeconomics , enforcement , law , marketing , art , ecology , linguistics , philosophy , literature , political science , computer science , biology , programming language
Bribery of government officials is commonly used to obtain contracts in many foreign countries. The Foreign Corrupt Practices Act of 1977 (FCPA) made it illegal for US firms to pay bribes, even in the absence of regulation on the bribe‐taking side of the transaction. Opponents of the law claimed it would put US firms at a competitive disadvantage relative to foreign suppliers who were not subject to the same regulation. This paper models the effects of two types of anti‐bribery regulation. In general, regulation of bribe takers reduces the disciplinary effect of competition and is ineffective in deterring bribery unless the penalties exceed the gains. The impact of regulation of bribe payers (i.e. suppliers) depends on whether the law is applicable to all bribe payers, firms' costs and the existence of contract price constraints on the purchasing side of the transaction. The results lead to empirically testable hypotheses about US exports to bribery‐prone countries.