(), Sven-Olof Fridolfsson
(), Chloe Le Coq
() and Giancarlo Spagnolo
Maria Bigoni: University of Bologna
Sven-Olof Fridolfsson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Chloe Le Coq: Stockholm School of Economics, Postal: SITE
Giancarlo Spagnolo: University of Rome
Abstract: This paper presents results from a laboratory experiment studying the channels through which different law enforcement strategies deter cartel formation. With leniency policies offering immunity to the first reporting party, a high fine is the main determinant of deterrence, having a strong effect 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 fine matter more, and low fines are exploited to punish defections. The results appear relevant to several other forms of crimes that share cartels’ strategic features, including corruption and financial fraud.
38 pages, First version: January 17, 2011. Revised: December 11, 2014. Earlier revisions: December 11, 2014.
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