Abstract

http://ssrn.com/abstract=2153434
 


 



Trust and Deterrence


Maria Bigoni


University of Bologna - Department of Economics

Sven-Olof Fridolfsson


Research Institute of Industrial Economics (IFN)

Chloe Le Coq


SITE-Stockholm School of Economics

Giancarlo Spagnolo


Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

June 2012

CEPR Discussion Paper No. DP9002

Abstract:     
This paper presents results from a laboratory experiment on 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 then mainly driven by 'distrust', the fear of partners deviating and reporting. Absent leniency, the probability of detection and the expected fine matter the most, and low fines are exploited to punish defections. The results appear relevant to several other crimes sharing cartels' strategic features, including corruption and financial fraud.

Number of Pages in PDF File: 42

Keywords: Antitrust, Betrayal, Cartels, Collusion, Distrust, Fines, Leniency, Whistleblowers

JEL Classification: C92, D03, K21, K42, L41

working papers series





Date posted: September 28, 2012  

Suggested Citation

Bigoni, Maria and Fridolfsson, Sven-Olof and Le Coq, Chloe and Spagnolo, Giancarlo, Trust and Deterrence (June 2012). CEPR Discussion Paper No. DP9002. Available at SSRN: http://ssrn.com/abstract=2153434

Contact Information

Maria Bigoni (Contact Author)
University of Bologna - Department of Economics ( email )
Piazza Scaravilli 2
Bologna, Bologna 40126
Italy
+390512098122 (Phone)
Sven-Olof Fridolfsson
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
Chloe Le Coq
SITE-Stockholm School of Economics ( email )
PO Box 6501
Stockholm, 11383
Sweden
HOME PAGE: http://www.hhs.se/SITE/Staff/Pages/ChloeLeCoq.aspxl
Giancarlo Spagnolo
Stockholm School of Economics (SITE) ( email )
P.O. Box 6501
Stockholm
Sweden
HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
University of Rome 'Tor Vergata' ( email )
Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy
EIEF ( email )
Via Due Macelli, 73
Rome, 00187
Italy
HOME PAGE: http://WWW.EIEF.IT
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