Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

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

Maria Bigoni (), Sven-Olof Fridolfsson, Chloé Le Coq () and Giancarlo Spagnolo
Additional contact information
Maria Bigoni: IMT-Lucca
Sven-Olof Fridolfsson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Chloé Le Coq: Stockholm Institute of Transition Economies, Postal: Stockholm School of Economics
Giancarlo Spagnolo: Stockholm Institute of Transition Economics, Postal: Stockholm School of Economics, Tor Vergata University and CEPR

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

JEL-codes: C73; C92; L41

Language: English

40 pages, First version: April 24, 2008. Revised: August 6, 2009.

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