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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)

  • Kvaløy, Ola

    ()
    (UiS Business School, University of Stavanger)

  • Olsen, Trond E.

    ()
    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Sørgard, Lars

    ()
    (Dept. of Economics, Norwegian School of Economics)

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 rather intuitive relationship. This paper offers a model that can contribute 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, the model shows that competition authorities who attempt to fight cartels by means of tougher sanctions for all offenders 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 Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2013/5.

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Length: 33 pages
Date of creation: 27 May 2013
Date of revision:
Handle: RePEc:hhs:nhhfms:2013_005

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Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
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Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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Keywords: Antitrust enforcement; leniency programs; economics of crime;

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  1. Eric Langlais, 2008. "Detection Avoidance and Deterrence: Some Paradoxical Arithmetic," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(3), pages 371-382, 06.
  2. 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.
  3. Joseph E. Harrington, 2008. "OPTIMAL CORPORATE LENIENCY PROGRAMS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 215-246, 06.
  4. 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.
  5. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  6. 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.
  7. Vasiliki Bageri & Yannis Katsoulacos & Giancarlo Spagnolo, 2013. "The distortive effects of antitrust fines based on revenue," Working Papers 153, Bank of Greece.
  8. Keith N. Hylton, 1996. "Optimal Law Enforcement and Victim Precaution," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 197-206, Spring.
  9. Arun S. Malik, 1990. "Avoidance, Screening and Optimum Enforcement," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 341-353, Autumn.
  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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