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This paper reports results from an experiment studying how …nes, leniency and rewards for whistleblowers a¤ect cartel formation and prices. Antitrust without leniency reduces cartel formation but increases cartel prices: subjects use costly …nes 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 …ndings may also be relevant for similar white-collar organized crimes, like corruption and fraud.JEL codes: C73, C92 and L41

This paper empirically investigates the effectiveness of competition policy by estimating its impact on Total Factor Productivity (TFP) growth for 22 industries in 12 OECD countries over the period [1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005]. We find a robust positive and significant effect of competition policy as measured by newly created indexes. We provide several arguments and results based on instrumental variables estimators as well as non-linearities to support the claim that the established link can be interpreted in a causal way. At a disaggregated level, the effect on TFP growth is particularly strong for specific aspects of competition policy related to its institutional set up and antitrust activities (rather than merger control). The effect is strengthened by good legal systems, suggesting complementarities between competition policy and the efficiency of law enforcement institutions.

We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated symmetric Prisoner's Dilemma. Our axioms characterize a unique selection criterion that is also useful as a tool for applied comparative statics exercises as it results in a critical discount factor δ* strictly larger than δ, the standard criterion that has often been used in applications. In an experimental test we find a strong predictive power of our proposed criterion. For parameter changes where the standard and our criterion predict differently, changes in observed cooperation follow predictions based on δ* . (JEL C72, C73, C92, D81)

No abstract

We run a regression discontinuity design analysis to document the causal effect of increasing buyers' discretion on procurement outcomes in a large database for public works in Italy. Works with a value above a given threshold have to be awarded through an open auction. Works below this threshold can be more easily awarded through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid. Our main result is that discretion increases the probability that the same firm wins repeatedly, and it does not deteriorate (and may improve) the procurement outcomes we observe. The effects of discretion persist when we repeat the analysis controlling for the geographical location, corruption, social capital and judicial efficiency in the region of the public buyers running the auctions.

We study the consequences of leniency -reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers -on sequential, bilateral, illegal transactions, such as corruption, manager-auditor collusion, or drug deals. It is known that leniency helps deterring illegal relationships sustained by repeated interaction. Here we Þnd that -when not properly designed -leniency may simultaneously provide an effective governance mechanism for occasional sequential illegal transactions that would not be feasible in its absence.JEL Classification: K42, K21

We provide a model of the impact of bank mergers on loan competition, individual reserve management and aggregate liquidity risk. Banks hold reserves against liquidity shocks, refinance in the interbank market and compete in a differentiated loan market. A merger creates an internal money market that induces financial cost advantages and may increase reserve holdings. We assess the liquidity risk and the expected liquidity needs for each bank and for the system, and relate them to the degree of competition in the loan market. Plausible scenarios emerge in which a more competitive environment is beneficial for the liquidity situation of the interbank market.JEL Classification: D43, G21, G28, L13