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Trust, Leniency, and Deterrence

Author

Listed:
  • Maria Bigoni
  • Sven-Olof Fridolfsson
  • Chloé Le Coq
  • Giancarlo Spagnolo

Abstract

This article presents results from a laboratory experiment studying the channels through which different law enforcement strategies deter cartel formation. With leniency policies offering immunity to the first reporting party, a high fine is the main determinant of deterrence, having a strong effect even when the probability of exogenous detection is zero. Deterrence appears to be mainly driven by "distrust"; here, the fear of partners deviating and reporting. Absent leniency, the probability of detection and the expected fine matter more, and low fines are exploited to punish defections. The results appear relevant to several other forms of crimes that share cartels’ strategic features, including corruption and financial fraud. (JEL C92, D03, K21, K42, L41.)

Suggested Citation

  • Maria Bigoni & Sven-Olof Fridolfsson & Chloé Le Coq & Giancarlo Spagnolo, 2015. "Trust, Leniency, and Deterrence," Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(4), pages 663-689.
  • Handle: RePEc:oup:jleorg:v:31:y:2015:i:4:p:663-689.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewv006
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Joseph E. Harrington, Jr., 2011. "Corporate Leniency with Private Information: The Push of Prosecution and the Pull of Pre-emption," Economics Working Paper Archive 573, The Johns Hopkins University,Department of Economics.
    2. Maria Perrotta Berlin & Bei Qin & Giancarlo Spagnolo, 2018. "Leniency, Asymmetric Punishment and Corruption: Evidence from China," CEIS Research Paper 431, Tor Vergata University, CEIS, revised 23 Apr 2018.
    3. Harrington, Joseph E. & Hernan Gonzalez, Roberto & Kujal, Praveen, 2016. "The relative efficacy of price announcements and express communication for collusion: Experimental findings," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 251-264.
    4. Jeffrey V. Butler & Danila Serra & Giancarlo Spagnolo, 2017. "Motivating Whistleblowers," CEIS Research Paper 419, Tor Vergata University, CEIS, revised 12 Dec 2017.
    5. Carsten J. Crede & Liang Lu, 2016. "The effects of endogenous enforcement on strategic uncertainty and cartel deterrence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 16-08, School of Economics, University of East Anglia, Norwich, UK..
    6. repec:eee:trapol:v:63:y:2018:i:c:p:80-89 is not listed on IDEAS
    7. repec:kap:revind:v:52:y:2018:i:3:d:10.1007_s11151-017-9586-8 is not listed on IDEAS
    8. repec:kap:decono:v:166:y:2018:i:1:d:10.1007_s10645-017-9309-4 is not listed on IDEAS
    9. Sascha Behnk & Iván Barreda-Tarrazona & Aurora García-Gallego, 2012. "Reducing deception through subsequent transparency - An experimental investigation," Working Papers 2012/14, Economics Department, Universitat Jaume I, Castellón (Spain).

    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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