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Optimal Fines in the Era of Whistleblowers - Should Price Fixers Still Go to Prison?

Paolo Buccirossi

Laboratory of Economics, Antitrust, Regulation (LEAR)

Giancarlo Spagnolo

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

December 12, 2005

Lear Research Paper No. 05-01

We review current methods for calculating fines against cartels in the US and EU, and simulate their deterrence effects under different assumptions on the legal and economic environment. It is likely that European fines have not had significant deterrence effects before leniency programs were introduced. Previous simulations of the effects of fines ignore the different type of deterrence that leniency programs bring about, and, therefore, grossly overstate the minimum fine likely to have deterrence effects. With schemes that reward whistleblowers, the minimum fine with deterrence effects falls to extremely low levels (below 10% of the optimal Beckerian fine). Strategic judgement-proofness can and should be prevented by suitable regulation or extended liability. Criminal sanctions, in the form of imprisonment, certainly bring benefits (and costs) in terms of cartel deterrence, but the firms' limited ability to pay does not appear any longer such a strong argument for their introduction.

Number of Pages in PDF File: 53

Keywords: Antitrust Amnesty, Cartels, Collusion, Corporate crime, Debt, Deterrence, Extended liability, Fines, Law enforcement, Leniency, Immunity, Imprisonment, Judgment proofness, Optimal fines, Optimal sanctions, Optimal liability, Organized crime, Political economy, Rewards, Sunk cost bias, Whistleblowers

JEL Classification: K21, K42, L20

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Date posted: December 28, 2005  

Suggested Citation

Buccirossi, Paolo and Spagnolo, Giancarlo, Optimal Fines in the Era of Whistleblowers - Should Price Fixers Still Go to Prison? (December 12, 2005). Lear Research Paper No. 05-01. Available at SSRN: http://ssrn.com/abstract=871726 or http://dx.doi.org/10.2139/ssrn.871726

Contact Information

Paolo Buccirossi (Contact Author)
Laboratory of Economics, Antitrust, Regulation (LEAR) ( email )
Via del Banco di S. Spirito 42
Rome, 00186
+39 066 830 0530 (Phone)
+39 066 876 8286 (Fax)
Giancarlo Spagnolo
Stockholm School of Economics (SITE) ( email )
P.O. Box 6501
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
EIEF ( email )
Via Due Macelli, 73
Rome, 00187
Feedback to SSRN

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