Working Paper: CEPR ID: DP7417
Authors: Maria Bigoni; Sven-Olof Fridolfsson; Chloé Le Coq; Giancarlo Spagnolo
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; competition policy; coordination; corporate crime; desistance; deterrence; law enforcement; organized crime; price-fixing; punishment; whistleblowers
JEL Codes: C73; C92; K21; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Antitrust laws without leniency (K21) | Reduced number of cartels formed (L12) |
| Antitrust laws without leniency (K21) | Increased cartel prices (D49) |
| Leniency programs (K21) | Reduced cartel formation rates (L49) |
| Leniency programs (K21) | Increased cartel prices (D49) |
| Rewards for whistleblowers (H26) | Systematic reporting of cartels (L12) |
| Systematic reporting of cartels (L12) | Lower prices (D49) |
| Exclusion of ringleader from leniency (K21) | Increased cartel prices (D49) |