Fines, Leniency and Rewards in Antitrust: An Experiment

41 Pages Posted: 24 Jan 2011 Last revised: 30 Jan 2011

See all articles by Sven-Olof Fridolfsson

Sven-Olof Fridolfsson

Research Institute of Industrial Economics (IFN)

Maria Bigoni

University of Bologna - Department of Economics; IZA Institute of Labor 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: August 6, 2009

Abstract

This paper reports results from an experiment studying how fines, leniency programs and reward schemes for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation, but increases cartel prices: subjects use costly fines as (altruistic) punishments. Leniency further increases deterrence, but stabilizes surviving cartels: subjects appear to anticipate harsher times after defections as leniency reduces recidivism and lowers post-conviction prices. With rewards, cartels are reported systematically and prices finally fall. If a ringleader is excluded from leniency, deterrence is unaffected but prices grow. Differences between treatments in Stockholm and Rome suggest culture may affect optimal law enforcement.

Keywords: Cartels, Collusion, Coordination, Competition policy, Deterrence, Desistance, Law enforcement, Price-fixing, Punishment, Recidivism, Whistleblowers

JEL Classification: C73, C92, L41

Suggested Citation

Fridolfsson, Sven-Olof and Bigoni, Maria and Le Coq, Chloe and Spagnolo, Giancarlo, Fines, Leniency and Rewards in Antitrust: An Experiment (August 6, 2009). Available at SSRN: https://ssrn.com/abstract=1744864 or http://dx.doi.org/10.2139/ssrn.1744864

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

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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)

London
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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