Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting

54 Pages Posted: 18 Sep 2018

See all articles by Claudia M. Landeo

Claudia M. Landeo

University of Alberta - Department of Economics

Kathryn E. Spier

Harvard University - Law School - Faculty; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 13, 2018

Abstract

This paper reports the results of an experiment designed to assess the ability of an enforcement agency to detect and deter harmful short-term activities committed by groups of injurers. With ordered-leniency policies, early cooperators receive reduced sanctions. We replicate the strategic environment described by Landeo and Spier (2018). In theory, the optimal ordered-leniency policy depends on the refinement criterion applied in case of multiplicity of equilibria. Our findings are as follows. First, we provide empirical evidence of a "race-to-the-courthouse" effect of ordered leniency: Mild and Strong Leniency induce the injurers to self-report promptly. These findings suggest that the injurers' behaviors are aligned with the risk-dominance refinement. Second, Mild and Strong Leniency significantly increase the likelihood of detection of harmful activities. This fundamental finding is explained by the high self-reporting rates under ordered-leniency policies. Third, as a result of the increase in the detection rates, the averages fines are significantly higher under Mild and Strong Leniency. As expected when the risk-dominance refinement is applied, Mild Leniency exhibits the highest average fine.

Keywords: Law Enforcement, Ordered Leniency, Self-Reporting, Experiments, Leniency, Coordination Game, Prisoners' Dilemma Game, Risk Dominance, Pareto Dominance, Equilibrium Selection, Non-Cooperative Games, Harmful Externalities, Corporate Misconduct, White-Collar Crime, Plea Bargaining

JEL Classification: C72, C90, D86, K10, L23

Suggested Citation

Landeo, Claudia M. and Spier, Kathryn E., Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting (September 13, 2018). Available at SSRN: https://ssrn.com/abstract=3250945 or http://dx.doi.org/10.2139/ssrn.3250945

Claudia M. Landeo (Contact Author)

University of Alberta - Department of Economics ( email )

Henry Marshall Tory Building 7-25
Edmonton, Alberta T6G 2H4
Canada

HOME PAGE: http://sites.google.com/a/ualberta.ca/claudia-m-landeo-s-home-page/home

Kathryn E. Spier

Harvard University - Law School - Faculty ( email )

1575 Massachusetts
Hauser 302
Cambridge, MA 02138
United States
(617) 496-0019 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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