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Trust, Leniency and Deterrence

  • Bigoni, Maria


    (University of Bologna)

  • Fridolfsson, Sven-Olof


    (Research Institute of Industrial Economics (IFN))

  • Le Coq, Chloe


    (Stockholm School of Economics)

  • Spagnolo, Giancarlo


    (University of Rome)

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.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 859.

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Length: 38 pages
Date of creation: 17 Jan 2011
Date of revision: 11 Dec 2014
Handle: RePEc:hhs:iuiwop:0859
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
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  2. Bigoni, Maria & Fridolfsson, Sven-Olof & Le Coq, Chloé & Spagnolo, Giancarlo, 2009. "Fines, Leniency and Rewards in Antitrust: an Experiment," CEPR Discussion Papers 7417, C.E.P.R. Discussion Papers.
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  22. Jeroen Hinloopen & Adriaan R. Soetevent, 2008. "Laboratory evidence on the effectiveness of corporate leniency programs," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 607-616.
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  27. Myong-Hun Chang & Joseph E. Harrington, Jr., 2008. "The Impact of a Corporate Leniency Program on Antitrust Enforcement and Cartelization," Economics Working Paper Archive 548, The Johns Hopkins University,Department of Economics.
  28. Maria Bigoni & Sven-Olof Fridolfsson & Chloé Le Coq & Giancarlo Spagnolo, 2012. "fines, leniency, and rewards in antitrust," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 368-390, 06.
  29. Jana Krajcova & Andreas Ortmann, 2008. "Testing Leniency Programs Experimentally: The Impact of “Natural” Framing," CERGE-EI Working Papers wp372, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
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