Optimal Fines in the Era of Whistleblowers

43 Pages Posted: 3 May 2006

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

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

Paolo Buccirossi

Laboratorio di economia, antitrust, regolamentazione (LEAR)

Date Written: January 2006


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.

Keywords: Cartels, collusion, corporate crime, debt, deterrence, extended liability, fines, law enforcement, leniency, immunity, imprisonment, judgement proofness, optimal fines, optimal sanctions, optimal liability, organized crime, political economy, rewards, sunk cost bias, whistleblower

JEL Classification: D43, D78, G18, G33, K21, K42, L41

Suggested Citation

Spagnolo, Giancarlo and Buccirossi, Paolo, Optimal Fines in the Era of Whistleblowers (January 2006). Available at SSRN: https://ssrn.com/abstract=900381

Giancarlo Spagnolo (Contact Author)

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)

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


Paolo Buccirossi

Laboratorio di economia, antitrust, regolamentazione (LEAR) ( email )

Via di Monserrato 48
Rome, 00186
+39 066 830 0530 (Phone)

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