FINES, LENIENCY, and REWARDS in antitrust

RAND Journal of Economics

V ol.43,No.2,Summer2012

pp.368–390

FINES,LENIENCY,and REW ARDS in antitrust

Maria Bigoni∗

Sven-Olof Fridolfsson∗∗

Chlo´e Le Coq∗∗∗

and

Giancarlo Spagnolo∗∗∗∗

This article reports results from an experiment studying how FINES,LENIENCY,and REW ARDS 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 postconviction prices after reports/LENIENCY.With REW ARDS,prices fall at the competitive level.Overall,our results suggest a strong cartel deterrence potential for well-run LENIENCY and REW ARD schemes.Thesefindings may also be relevant for similar white-collar organized crimes, such as corruption and fraud.

1.Introduction

The last decades have brought a major innovation in antitrust law enforcement.In most Organisation for Economic Co-operation and Development countries,LENIENCY policies—schemes that reduce sanctions for self-reporting cartel members—are now the main tool for

∗University of Bologna;maria.bigoni@unibo.it.

∗∗Research Institute of Industrial Economics;sven-olof.fridolfsson@ifn.se.

∗∗∗SITE and Stockholm School of Economics;chloe.lecoq@hhs.se.

∗∗∗∗University of Rome Tor Vergata,SITE,EIEF,and CEPR;giancarlo.spagnolo@uniroma2.it.

Many thanks to our editor,Judith Chevalier,and to two anonymous referees as well as to Martin Dufwenberg,Tore Ellingsen,Nisvan Erkal,Magnus Johanneson,Dorothea Kuebler,Joe Harrington,Nathan Miller,Massimo Motta, Hans-Theo Normann,Sander Onderstaal,Charles Plott,Patrick Rey,Maarten Pieter Schinkel,Adriaan Soetevent,Jean Tirole,and Julian Wright for discussions and advice related to this project,and to audiences in Alicante(IMEBE 2008),Amsterdam(ENABLE Conference),Berlin(ESMT and WZB),Boston(IIOC2009),Copenhagen(University of Copenhagen),Crete(CRESSE2009),Frankfurt,Gerzensee(ESSET2007),Gothenburg(NWBEE2008),Mannheim (RNIC2007),Norwich(UEA-CCP),Rome(Tor Vergata and EIEF),Toulouse,San Francisco(IOS-ASSA Meeting2009), Singapore,Stockholm(Ifn,Stockholm School of Economics,and Konkurrensverket),and Naples(Universit`a Federico II)for comments and suggestions.We also gratefully acknowledge research funding from Konkurrensverket(Swedish Competition Authority)that made this research possible.Le Coq thanks Jan Wallanders och Tom Hedelius Stiftelse for financial support.