What if cartel fines are not high enough? implications on deterrence and productive efficiency.

Resvista de economía y estadística

Universidad Nacional de Córdoba

Lugar: Córdoba; Año: 2013 vol. 51 p. 53 - 53

0034-8066

I develop a model in which cartel firms allocate costly effort to activities related to productive efficiency and concealment: the higher the fine or the probability of inspection, the more biased the firms´ effort allocation towards concealment. In this context, a fine increase can improve welfare through fewer cartels, but also reduce it through more inefficient surviving ones. The analysis suggests a carefully design of policy such that achieving a level of deterrence and productive (in)efficiency socially accepted. Within this framework, I also consider the implications of leniency programs. I show that leniency enhances incentives on deviation more that in standard models of collusion.