Monday, December 14, 2009
Posted by D. Daniel Sokol
Maria Bigoni, University of Padua - Department of Economics, Sven-Olof Fridolfsson, Research Institute of Industrial Economics, Chloe Le Coq, Stockholm School of Economics, and Giancarlo Spagnolo, University of Tor Vergata, Stockholm School of Economics discuss Fines, Leniency and Rewards in Antitrust: an Experiment.
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.