An experimental evaluation of anti-cartel devices.

Summary This paper proposes an experimental approach to the effectiveness of anti-cartel schemes, which result from individual decisions to engage in these anticompetitive cartel practices. Our experiments compare individual propensities to form cartels under monetary sanctions, leniency, compliance and exclusionary schemes. Our study thus assesses the impact of sanctioning schemes, their levels and different probabilities of detection, and identifies the influence of certain individual characteristics, such as gender and risk aversion, on cartel formation. Our results show that the debarment scheme, and to a lesser extent the compliance scheme, are the most effective in deterring cartel formation. The level and probability of punishment have the expected effects, but in non-linear ways. Leniency, on the other hand, increases the effectiveness of fines. Finally, gender and risk aversion influence the propensity to choose to engage in a cartel, but not their rate of formation. The implications of these results for regulators and firms are substantial: they provide insight into how to better deter these illegal practices.