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Research Institute of Industrial Economics (IFN) Working Paper Series

No 738:
Fines, Leniency and Rewards in Antitrust: An Experiment

Maria Bigoni (), Sven-Olof Fridolfsson (), Chloé Le Coq () and Giancarlo Spagnolo

Abstract: This paper reports results from an experiment studying how fines, leniency programs and reward schemes for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation, but increases cartel prices: subjects use costly fines as (altruistic) punishments. Leniency further increases deterrence, but stabilizes surviving cartels: subjects appear to anticipate harsher times after defections as leniency reduces recidivism and lowers post-conviction prices. With rewards, cartels are reported systematically and prices finally fall. If a ringleader is excluded from leniency, deterrence is unaffected but prices grow. Differences between treatments in Stockholm and Rome suggest culture may affect optimal law enforcement.

Keywords: Cartels; Collusion; Coordination; Competition policy; Deterrence; Desistance; Law enforcement; Price-fixing; Punishment; Recidivism; Whistleblowers; (follow links to similar papers)

JEL-Codes: C73; C92; L41; (follow links to similar papers)

40 pages, April 24, 2008, Revised August 6, 2009

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