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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2013/5:
Crime and punishment: When tougher antitrust enforcement leads to higher overcharge

Sissel Jensen (), Ola Kvaløy (), Trond E. Olsen () and Lars Sørgard ()

Abstract: The economics of crime and punishment postulates that higher punishment leads to lower crime levels, or less severe crime. It is however hard to get empirical support for this rather intuitive relationship. This paper offers a model that can contribute to explain why this is the case. We show that if criminals can spend resources to reduce the probability of being detected, then a higher general punishment level can increase the crime level. In the context of antitrust enforcement, the model shows that competition authorities who attempt to fight cartels by means of tougher sanctions for all offenders may actually lead cartels to increase their overcharge when leniency programs are in place.

Keywords: Antitrust enforcement; leniency programs; economics of crime; (follow links to similar papers)

JEL-Codes: K20; K21; L40; (follow links to similar papers)

33 pages, May 27, 2013

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