Trust, Salience and Deterrence: Evidence from an Antitrust Experiment
Research Institute of Industrial Economics (IFN)
University of Bologna - Department of Economics
Chloe Le Coq
SITE-Stockholm School of Economics
Stockholm School of Economics (SITE)
January 17, 2011
IFN Working Paper No. 859
We present results from a laboratory experiment identifying the main channels through which different law enforcement strategies deter organized economic crime. The absolute level of a fine has a strong deterrence effect, even when the exogenous probability of apprehension is zero. This effect appears to be driven by distrust or fear of betrayal, as it increases significantly when the incentives to betray partners are strengthened by policies offering amnesty to “turncoat whistleblowers”. We also document a strong deterrence effect of the sum of fines paid in the past, which suggests a significant role for salience or availability heuristic in law enforcement.
Number of Pages in PDF File: 47
Keywords: Betrayal, Collusion, Corruption, Distrust, Fraud, Organized Crime, Whistleblowers
JEL Classification: C92, D03, D80, K21, K42, L41working papers series
Date posted: January 24, 2011 ; Last revised: May 5, 2012
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