Fighting cartels: how to deter hotheads?

Summary This article proposes an experimental approach that makes it possible to identify the individuals most likely to form a cartel: the "hotheads." The experiments test the deterrent effectiveness of different anti-cartel schemes by comparing the propensities of individuals to collude under different types of sanctions-fine, leniency, compliance, and debarment-and detection-detection with exogenous probability or whistleblowing in the case of leniency. Compliance and debarment are particularly deterrent; leniency is not. The deterrent effect of high fines is limited for "hotheads," who are more influenced by the magnitude of the risk of detection. Differences in gender and risk aversion affect behavior among other participants but not among those labeled "hotheads.