Trust, Leniency and Deterrence
This paper 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.
|Date of creation:||17 Jan 2011|
|Date of revision:||11 Dec 2014|
|Contact details of provider:|| Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden|
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