Fines, Leniency and Rewards in Antitrust: An Experiment
41 Pages Posted: 24 Jan 2011 Last revised: 30 Jan 2011
Date Written: August 6, 2009
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: Suggested Citation