Citation

Discussion Paper Details

Please find the details for DP5465 in an easy to copy and paste format below:

Full Details

Title: Optimal Fines in the Era of Whistleblowers

Author(s): Paolo Buccirossi and Giancarlo Spagnolo

Publication Date: January 2006

Keyword(s): amnesty, antitrust, cartels, collusion, corporate crime, debt, deterrence, extended liability, fines, immunity, imprisonment, judgement proofness, law enforcement, leniency, optimal fines, optimal liability, optimal sanctions, organized crime, political economy, rewards, sunk cost bias and whistleblowers

Programme Area(s): Industrial Organization

Abstract: 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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5465

Bibliographic Reference

Buccirossi, P and Spagnolo, G. 2006. 'Optimal Fines in the Era of Whistleblowers'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5465