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

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Author Info

  • Jensen, Sissel

    (NHH)

  • Kvaløy, Ola

    ()
    (UiS)

  • Olsen, Trond

    (NHH)

  • Sørgard, Lars

    (NHH)

Abstract

The economics of crime and punishment postulates that higher punishment leads to lower crime levels, or less severe crime. It is how- ever 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 University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2013/2.

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Length: 32 pages
Date of creation: 06 Mar 2013
Date of revision:
Handle: RePEc:hhs:stavef:2013_002

Contact details of provider:
Postal: University of Stavanger, NO-4036 Stavanger, Norway
Web page: http://www.uis.no/research/economics_and_finance
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Keywords: Antitrust Enforcement; Leniency; 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. Chen, Zhijun & Rey, Patrick, 2007. "On the Design of Leniency Programs," IDEI Working Papers 452, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jan 2012.
  3. 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.
  4. 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.
  5. 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.
  6. Mohamed Jellal & Saïd Souam, 2004. "Delegation, Incentives and Antitrust Enforcement," Working Papers 2004-41, Centre de Recherche en Economie et Statistique.
  7. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
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