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Crime and punishment: When tougher antitrust enforcement leads to higher overcharge

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Author Info

  • Jensen, Sissel

    ()
    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Kvaløy, Ola

    ()
    (University of Stavanger)

  • Olsen, Trond E.

    ()
    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Sorgard, Lars

    ()
    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

The economics of crime and punishment postulates that higher punishment leads to lower crime levels, or less severe crime. It is however hard to get empirical support for this intuitive relationship. This paper o¤ers a model that contributes to explain why this is the case. We show that if criminals can spend resources to reduce the probability of being detected, then a higher general punishment level can increase the crime level. In the context of antitrust enforcement, it is shown that competition authorities who attempt to …ght cartels by means of tougher sanctions for all o¤enders may actually lead cartels to increase their overcharge when leniency programs are in place.

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Bibliographic Info

Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 4/2013.

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Length: 32 pages
Date of creation: 18 Feb 2013
Date of revision:
Handle: RePEc:hhs:nhheco:2013_004

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Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
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Fax: 5595 9100
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Web page: http://www.nhh.no/sam/
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Keywords: antitrust enforcement; leniency programs; economics of crime.;

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  1. Arun S. Malik, 1990. "Avoidance, Screening and Optimum Enforcement," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 341-353, Autumn.
  2. Keith N. Hylton, 1996. "Optimal Law Enforcement and Victim Precaution," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 197-206, Spring.
  3. Zhijun Chen & Patrick Rey, 2013. "On the Design of Leniency Programs," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 917 - 957.
  4. Bageri, Vasiliki & Katsoulacos, Yannis & Spagnolo, Giancarlo, 2013. "The Distortive Effects of Antitrust Fines Based on Revenue," CEPR Discussion Papers 9518, C.E.P.R. Discussion Papers.
  5. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  6. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
  7. Stigler, George J, 1970. "The Optimum Enforcement of Laws," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 526-36, May-June.
  8. Eric Langlais, 2007. "Detection avoidance and deterrence: some paradoxical arithmetics," Working Papers of BETA 2007-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  9. Joseph E. Harrington, 2008. "OPTIMAL CORPORATE LENIENCY PROGRAMS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 215-246, 06.
  10. Mohamed Jellal & Saïd Souam, 2004. "Delegation, Incentives and Antitrust Enforcement," Working Papers 2004-41, Centre de Recherche en Economie et Statistique.
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