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Fines, Leniency and Rewards in Antitrust

by Chloé Le Coq and Giancarlo Spagnolo (with M. Bigoni and S. Fridolfsson), published in the Rand Journal of Economics

This article reports results from an experiment studying how fines, leniency and rewards for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation but increases cartel prices: subjects use costly fines as punishments. Leniency improves antitrust by strengthening deterrence but stabilizes surviving cartels: subjects appear to anticipate the lower post-conviction prices after reports/leniency. With rewards, prices fall at the competitive level. Overall our results suggest a strong cartel deterrence potential for well-run leniency and reward schemes. These findings may also be relevant for similar white-collar organized crimes, like corruption and fraud.

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