Trust, Salience and Deterrence: Evidence from an Antitrust Experiment

47 Pages Posted: 24 Jan 2011 Last revised: 5 May 2012

Sven-Olof Fridolfsson

Research Institute of Industrial Economics (IFN)

Maria Bigoni

University of Bologna - Department of Economics

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

Date Written: January 17, 2011

Abstract

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.

Keywords: Betrayal, Collusion, Corruption, Distrust, Fraud, Organized Crime, Whistleblowers

JEL Classification: C92, D03, D80, K21, K42, L41

Suggested Citation

Fridolfsson, Sven-Olof and Bigoni, Maria and Le Coq, Chloe and Spagnolo, Giancarlo, Trust, Salience and Deterrence: Evidence from an Antitrust Experiment (January 17, 2011). IFN Working Paper No. 859. Available at SSRN: https://ssrn.com/abstract=1744852 or http://dx.doi.org/10.2139/ssrn.1744852

Sven-Olof Fridolfsson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Maria Bigoni

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, Bologna 40126
Italy
+390512098134 (Phone)

HOME PAGE: http://https://www.unibo.it/sitoweb/maria.bigoni/en

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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