The Impact of Loss Aversion on Corruption

Corruption has been investigated based on cost–benefit models. However, studies have pointed to biases in corrupt decisions. The present research aimed to analyze the influence of loss aversion in the intent of corruption (Study 1) and corrupt behavior (Study 2) in a medium–high corrupted country (Brazil). A total of 163 university students from business courses participated in Study 1. It was found that, in the loss condition, people were up to three times more likely to decide for corruption than in the gain condition. For Study 2, 198 people took part in an experiment with a 2 (framing: gains and losses) X 2 (possibility of discovery: present X absent) design. It was again found higher corruption rates in the loss condition compared to the gain condition. The results show loss aversion as an important bias in corrupt decision-making, thus indicating the limitation of cost–benefit models to explain the corrupt decision.