Fishy Gifts: Bribing with Shame and Guilt

Ong, David (2008): Fishy Gifts: Bribing with Shame and Guilt.

Abstract

Gifts are often used where the institutions of contracting do not exist, or are underdeveloped, as in emerging markets, or otherwise unenforceable, as with illicit transactions in developed markets. The following is an analysis of gifts in the context of belief preferences with unobservable reciprocation. I show that if recipients are heterogeneously shame and guilt averse, the beliefs implied by a gift can induce a self-fulfilling reputation through their interaction. In particular, I show how a bribing firm, by varying the saliency of the bribe through cheap talk announcements or by varying the value of the gift, can induce free-riders (non-reciprocators) to reject and thus, reduce costs. In cases when the shame of accepting a possible bribe is too great, I show lowering the cost can invite free-riders to accept, and thus, reduce the shame of those who would reciprocate into accepting. The model was inspired by the gift giving practices of pharmaceutical firms to US doctors. I explain a perverse consequence of current policies to prevent reciprocation, and why the most obvious solution, a ban on gifts, has been adopted only by a handful of hospitals. I discuss implications for professional services where reciprocation is a credence good. To my knowledge, this is the first study of how the shame of accepting a gift may interact with the guilt of not reciprocating to select for reciprocation.

• Item Type: MPRA Paper
• Language: English
• Keywords: gifts, bribery, guilt, shame, gifts, drug firms, doctors, social norms, indirect speech, psychological trust game, contracting
• Subjects: I - Health, Education, and Welfare > I1 - Health > I11 - Analysis of Health Care Markets; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M31 - Marketing; H - Public Economics > H5 - National Government Expenditures and Related Policies > H51 - Government Expenditures and Health; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H75 - State and Local Government: Health ; Education ; Welfare ; Public Pensions; I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M37 - Advertising; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games

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