Deterring Antitrust Violations: Some Experimental Evidence

• NCJ Number: 106570
• Author(s): M K Block; V E Garety
• Date Published: Unknown
• Length: 45 pages
• Grant Number(s): 83-IJ-CX-4055
• Sponsoring Agency: National Institute of Justice (NIJ); US Dept of Justice NIJ Pub
• Publication Format: Document
• Publication Type: Research (Applied/Empirical)
• Language: English
• Country: United States of America

Annotation

This study of deterrence of antitrust activity tests the hypothesis that collusive markups decline with both the probability of detection and the severity of the penalty and that markups are more sensitive to changes in severity of penalty than certainty of detection.

Abstract

Laboratory experiments were organized in three groups: a baseline group testing behaviors of noncolluding sellers in sealed offer auctions; a comparison group in which sellers could collude without fear of penalty; and an antitrust enforcement group, in which sensitivity to collusion was tested by varying the probability of detection and the severity of penalty. Results indicate that the level of collusion was sensitive to expected profit: as profit from colluding fell, so did level of collusion. Collusive activity decreased as the severity of the sanction increased even when expected profit remained constant. Under conditions of uncertainty, subjects searched for the monopoly price less when threatened with possible penalty, and they searched longer for the incidence of the penalty when the probability of penalty was lower. 9 footnotes and 8 references.