Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting

Claudia Landeo and Kathryn E. Spier
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Kathryn E. Spier: Harvard Law School and NBER

No 127, Working Papers from Peruvian Economic Association

Abstract: This paper reports the results of an experiment designed to assess the ability of an enforcement agency to detect and deter harmful short-term activities committed by groups of injurers. With ordered-leniency policies, early cooperators receive reduced sanctions. We replicate the strategic environment described by Landeo and Spier (2018). In theory, the optimal ordered-leniency policy depends on the refinement criterion applied in case of multiplicity of equilibria. Our findings are as follows. First, we provide empirical evidence of a “race-to-the-courthouse” effect of ordered leniency: Mild and Strong Leniency induce the injurers to self-report promptly. These findings suggest that the injurers' behaviors are aligned with the risk-dominance refinement. Second, Mild and Strong Leniency significantly increase the likelihood of detection of harmful activities. This fundamental finding is explained by the high self-reporting rates under ordered-leniency policies. Third, as a result of the increase in the detection rates, the averages fines are significantly higher under Mild and Strong Leniency. As expected when the risk-dominance refinement is applied, Mild Leniency exhibits the highest average fine.

Keywords: Law Enforcement; Ordered Leniency; Self-Reporting; Experiments; Leniency; Coordination Game; Prisoners' Dilemma Game; Risk Dominance; Pareto Dominance; Equilibrium Selection; Non-Cooperative Games; Harmful Externalities; Corporate Misconduct; White-Collar Crime; Securities Fraud; Insider Trading; Market Manipulation; Whistleblowers; Plea Bargaining; Tax Evasion; Environmental Policy Enforcement (search for similar items in EconPapers)
JEL-codes: C72 C90 D86 K10 L23 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting (2018)
Working Paper: Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting (2018)
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