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Fines, Leniency and Rewards in Antitrust: An Experiment

  • Bigoni, Maria

    ()

    (IMT-Lucca)

  • Fridolfsson, Sven-Olof

    ()

    (Research Institute of Industrial Economics (IFN))

  • Le Coq, Chloé

    ()

    (Stockholm Institute of Transition Economies)

  • Spagnolo, Giancarlo

    (Stockholm Institute of Transition Economics)

This paper reports results from an experiment studying how fines, leniency programs and reward schemes for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation, but increases cartel prices: subjects use costly fines as (altruistic) punishments. Leniency further increases deterrence, but stabilizes surviving cartels: subjects appear to anticipate harsher times after defections as leniency reduces recidivism and lowers post-conviction prices. With rewards, cartels are reported systematically and prices finally fall. If a ringleader is excluded from leniency, deterrence is unaffected but prices grow. Differences between treatments in Stockholm and Rome suggest culture may affect optimal law enforcement.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 738.

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Length: 40 pages
Date of creation: 24 Apr 2008
Date of revision: 06 Aug 2009
Handle: RePEc:hhs:iuiwop:0738
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
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