Tuesday, September 17, 2013
Posted by D. Daniel Sokol
Sissel Jensen (Dept. of Economics, Norwegian School of Economics), Ola Kvaloy (UiS Business School, University of Stavanger), Trond Olsen (Dept. of Business and Management Science, Norwegian School of Economics) and Lars Sorgard (Dept. of Economics, Norwegian School of Economics) analyze Crime and punishment: When tougher antitrust enforcement leads to higher overcharge.
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.