Scandinavian Working Papers in Economics
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Konkurrensverket (Swedish Competition Authority) Working Paper Series in Law and Economics, Konkurrensverket (Swedish Competition Authority)

No 2014:2:
Trust, Leniency and Deterrence

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

Abstract: This paper presents results from a laboratory experiment studying the channels through which di erent law enforcement strategies deter cartel formation. With leniency policies o ering immunity to the rst reporting party, a high ne is the main determinant of deterrence, having a strong e ect 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 ne matter more, and low nes are exploited to punish defections. The results appear relevant to several other forms of crimes that share cartels' strategic features, including corruption and nancial fraud.

Keywords: Antitrust; Betrayal; Cartels; Collusion; Distrust; Fines; Leniency; Whistleblowers; (follow links to similar papers)

JEL-Codes: C92; D03; K21; K42; L41; (follow links to similar papers)

38 pages, September 18, 2014

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