Trust, Leniency and Deterrence

Maria Bigoni, Sven-Olof Fridolfsson, Chloe Le Coq and Giancarlo Spagnolo

No 859, Working Paper Series from Research Institute of Industrial Economics

Abstract: 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.

Keywords: Antitrust; Betrayal; Collusion; Corruption; Distrust; Fraud; Organized Crime; Whistleblowers (search for similar items in EconPapers)
JEL-codes: C92 D03 K21 K42 L41 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-01-17, Revised 2014-12-11
New Economics Papers: this item is included in nep-com, nep-exp and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Trust, Leniency, and Deterrence (2015)
Working Paper: Trust, Leniency and Deterrence (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0859

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