Competitive Pressure and Corporate Crime

Florian Baumann and Tim Friehe

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper explores the relationship between the intensity of competition in product markets and firms' incentives to lower their production costs by illegal means. Our framework combines a Salop circle with a crime model la Becker, allowing us to differentiate between several measures for the intensity of competition. We establish that more firms in the industry (i.e., lower entry costs) reduce the crime rate. Furthermore, whether more intense competition due to the increased substitutability of products raises or lowers the prevalence of criminal behavior can be clearly linked to the impact of such behavior on firms' production costs. Finally, we find that stricter law enforcement may entice more firms to enter the market, despite the higher expected sanction in the event of wrongdoing.

JEL-codes: D43 K14 L13 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-com and nep-law
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https://www.econstor.eu/bitstream/10419/100454/1/VfS_2014_pid_466.pdf (application/pdf)

Related works:
Journal Article: Competitive Pressure and Corporate Crime (2016)
Working Paper: Competitive pressure and corporate crime (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100454

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