optimal leniency and the organization design of group crime abstract we study a simple law enforcement model where the organizational structure of a criminal group is endogenous and determined jointly with the amnesty granted to whistleblowers we allow criminals to choose between a horizontal partnership and a vertical hierarchical organization structure and we study how this choice affects the optimal leniency granted by a benevolent legislator whose aim is to minimize crime we show that the optimal amnesty with an endogenous organizational choice is less lenient than that granted when the policy targets vertical organizations only in the equilibrium partnerships coexist with vertical organizations

beyond carbon pricing the role of banking and monetary policy in financing the transition to a low carbon economy it is widely acknowledged that introducing a price on carbon represents a crucial precondition for filling the current gap in low carbon investment however as this paper argues carbon pricing in itself may not be sufficient this is due to the existence of market failures in the process of creation and allocation of credit that may lead commercial banks the most important source of external finance for firms not to respond as expected to price signals under certain economic conditions banks would shy away from lending to low carbon activities even in the presence of a carbon price this possibility calls for the implementation of additional policies not based on prices in particular the paper discusses the potential role of monetary policies and macroprudential financial regulation modifying the incentives and constraints that banks face when deciding their lending strategy through for instance a differentiation of reserve requirements according to the destination of lending may fruitfully expand credit creation directed towards low carbon sectors this seems to be especially feasible in emerging economies where the central banking framework usually allows for a stronger public control on credit allocation and a wider range of monetary policy instruments than the sole interest rate

but who will monitor the monitor suppose that providing incentives for a group of individuals in a strategic context requires a monitor to detect their deviations what about the monitor s deviations to address this question i propose a contract that makes the monitor responsible for monitoring and thereby provides incentives even when the monitor s observations are not only private but costly too i also characterize exactly when such a contract can provide monitors with the right incentives to perform in doing so i emphasize virtual enforcement and suggest its implications for the theory of repeated games jel c78 d23 d82 d86

pre emptive corruption hold up and repeated interactions this paper analyses repeated interactions between a firm and an inspector who monitors regulatory compliance the firm may offer a bribe to pre empt the inspection corruption is unfeasible in the one shot game because of inspector hold up in an infinitely repeated game we characterize the set of bribes that can be sustained as equilibrium paths using the trigger strategy in this model the most likely bribe givers are not the firms that benefit the most from the illegal behaviour furthermore strengthening anti corruption policies has ambiguous welfare effects because it improves compliance only among a subset of firms and increases monitoring effort

the effectiveness of leniency programs when firms choose the degree of collusion abstract an antitrust authority grants leniency pre and post investigation it chooses the probability of an investigation firms pick the degree of collusion the more they collude the higher are profits but so is the probability of detection firms thus trade off higher profits against higher expected fines if firms are sufficiently patient leniency is ineffective it may even increase collusion increasing the probability of an investigation at low levels does not increase deterrence increasing the probability of an investigation at high levels reduces collusion yet never completely with bare pre investigation leniency deterrence is better than without leniency if firms are sufficiently impatient granting leniency pre and post is better than merely pre investigation

stock market development and low carbon economy the role of innovation and renewable energy abstract we examine the effect of stock market development smd on the low carbon economy lce we consider two channels renewable energy and technological innovation by which this affect occurs we use the cross sectional autoregressive distributed lags cs ardl approach to analyse panel time series data over the period 1980 2016 for european union member countries we demonstrate that smd impedes lce in the long run in contrast technological innovation ti is found to be a driving factor in achieving lce in the long run our results also support the argument that renewable energy consumption and production enhance lce stock market development fosters lce through the channels of renewable energy and technological innovation overall results are robust to the conditions of short and long run homogeneity and the cross sectional dependence in the sample our results pose important policy implications

laboratory evidence on the effectiveness of corporate leniency programs the number of cartels detected in the united states and in europe has increased considerably since the introduction of corporate leniency programs in antitrust legislation it cannot however be ruled out that this apparent success results in part from increased cartel activity we explore the effects of corporate leniency programs on pricing and cartel activity by use of an experiment we find that in the lab i fewer cartels are established when a leniency program is in place and ii cartels that do exist are less successful in charging prices above the static nash equilibrium price and have lower survival rates

energy consumption carbon emissions and economic growth in saudi arabia an aggregate and disaggregate analysis the objective of this study is to examine the relationship among economic growth carbon emissions and energy consumption at the aggregate and disaggregate levels for the aggregate energy consumption model we use total energy consumption per capita and co2 emissions per capita based on the total energy consumption for the disaggregate analysis we used oil gas and electricity consumption models along with their respective co2 emissions the long term income elasticities of carbon emissions in three of the four models are positive and higher than their estimated short term income elasticities these results suggest that carbon emissions increase with the increase in per capita income which supports the belief that there is a monotonically increasing relationship between per capita carbon emissions and per capita income for the aggregate model and for the oil and electricity consumption models the long and short term income elasticities of carbon emissions are negative for the gas consumption model this result indicates that if the saudi arabian economy switched from oil to gas consumption then an increase in per capita income would reduce carbon emissions the results also suggest that electricity is less polluting than other sources of energy

competition policy and cartel size this article examines endogenous cartel formation in the presence of a competition authority competition policy is shown to make the most inclusive stable cartels less inclusive in particular small firms that might have been cartel members in the absence of a competition authority are no longer members regarding the least inclusive stable cartels competition policy can either decrease or increase their size and in the latter case the collusive price can rise

legal principles in antitrust enforcement we study antitrust enforcement to channel price fixing incentives of cartels through setting fine schedules and detection levels fines obey legal principles punishments fit the crime proportionality bankruptcy considerations and minimum fines bankruptcy considerations limit maximum fines ensure abnormal cartel profits and impose a challenge for optimal antitrust enforcement we derive the fine schedule and detection level that are constrained optimal under legal principles and sustainability of cartel prices this fine schedule lies below the maximum fine makes collusion on lower prices more attractive than on higher prices and hence relates to marginal deterrence literature this article is protected by copyright all rights reserved

on the design of leniency programs abstractleniency programs contribute to destabilizing collusion but can also be abused and generate perverse effects this paper develops a simple model capturing this trade off which we use to relate the optimal leniency policy the carrot to the effectiveness of investigations the stick we show that it is always desirable to offer some leniency before an investigation is launched it is also optimal to offer some leniency once an investigation is underway when investigations are unlikely to succeed in uncovering cartels absent self reporting our analysis also confirms the usefulness of restricting leniency to the first informant only in contrast it does not support prohibiting leniency for repeat offenders

credible threats in extortion there is a fundamental credibility problem in the extortion business will the gang retaliate if i refuse to pay unlike reputation models we emphasize the up front investment choice by the gang of which potential victims are uncertain for small numbers of victims only a no extortion equilibrium exists however as the number of potential victims becomes large this equilibrium disappears the only subgame perfect equilibria have extortion and expected loss from violence we justify and examine the properties of one particular set of equilibria the model can also shed light on credibility problems in settings other than extortion

international antitrust enforcement and multimarket contact this article analyzes cartel formation and international antitrust enforcement when multinational firms operate in several jurisdictions with local antitrust authorities we are concerned with how the sustainability of collusion in one local market is affected by the existence of collusion in other markets when they are linked by a negative demand relationship the interdependence of cartel stability across markets leads to potential externalities in antitrust enforcement across jurisdictions local antitrust enforcement equilibrium enforcement may exhibit a nonmonotonicity in the degree of market integration we compare it with globally optimal antitrust enforcement policy and discuss the role of international antitrust coordination

fines leniency and rewards in antitrust this article reports results from an experiment studying how fines leniency and rewards for whistleblowers affect cartel formation and prices antitrust without leniency reduces cartel formation but increases cartel prices subjects use costly fines as punishments leniency improves antitrust by strengthening deterrence but stabilizes surviving cartels subjects appear to anticipate the lower postconviction 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 findings may also be relevant for similar white collar organized crimes such as corruption and fraud

modeling the birth and death of cartels with an application to evaluating competition policy one of the primary challenges to measuring the impact of antitrust policy on collusion is that the cartel population is unobservable we observe only the population of discovered cartels to address this challenge a model of cartel creation and dissolution is developed to endogenously derive the populations of cartels and discovered cartels it is then shown how one can infer the impact of antitrust policy on the population of cartels by measuring its impact on the population of discovered cartels in particular the change in the distribution on the duration of discovered cartels could be informative in assessing whether a new antitrust policy is reducing the latent rate of cartels

economic growth co2 emissions and energy consumption what causes what and where abstract this paper applies panel vector autoregression pvar along with a system generalized method of moment system gmm to examine the dynamic causal relationship between economic growth carbon emissions and energy consumption for 116 countries over the period 1990 2014 using multivariate model the empirical results from this study have established key relationships which have important policy implications first at the global and regional levels economic growth does not cause energy consumption second with the exception of the global and caribbean latin america economic growth has no causal impact on carbon emissions however economic growth has a negative impact on carbon emissions at the global level and the caribbean latin america third carbon emissions positively cause economic growth fourth energy consumption positively causes economic growth in sub saharan africa while it negatively causes economic growth at the global middle east and north africa mena asia pacific and caribbean latin america fifth energy consumption positively causes carbon emissions in mena but causes carbon emissions negatively in sub saharan africa and caribbean latin america lastly with the exception of mena and the global sample carbon emissions do not cause energy consumption the impulse response function shows evidence of environmental kuznets curve at the global scale and sub saharan africa the policy implications of this paper are discussed

corporate leniency programs when firms have private information the push of prosecution and the pull of pre emption a corporate leniency program provides relief from government penalties to the first member of a cartel to come forward and cooperate with the authorities this study explores the incentives to apply for leniency when each cartel member has private information as to the likelihood that the competition authority will be able to convict them without a cooperating firm a firm may apply for leniency because it fears being convicted prosecution effect or because it fears another firm will apply pre emption effect policies by the competition authority to magnify concerns about pre emption and thereby induce greater use of the leniency program are also explored

endogenous communication and tacit coordination in market entry games an explorative experimental study this paper explores experimentally the effects of costly communication possibilities in market entry games it is shown that these effects depend on whether entry costs are symmetric or asymmetric in the former but not the latter case communication possibilities increase coordination success substantially and are likely to generate inferior outcomes for consumers furthermore cost asymmetries provide a tacit coordination cue that is robust to changes in the game and is used by experienced players as a substitute to communication it is also shown that although communication opens up for aggressive market domination strategies such strategies are not used often successful

china s changing energy intensity trend a decomposition analysis china experienced a dramatic decline in energy intensity from the onset of economic reform in the late 1970s until 2000 but since then the rate of decline slowed and energy intensity actually increased in 2003 most previous studies found that most of the decline was due to technological change but disagreed on the role of structural change to the best of our knowledge no decomposition study has investigated the role of inter fuel substitution in the decline in energy intensity or the causes of the rise in energy intensity since 2000 in this paper we use logarithmic mean divisia index lmdi techniques to decompose changes in energy intensity in the period 1980 2003 we find that 1 technological change is confirmed as the dominant contributor to the decline in energy intensity 2 structural change at the industry and sector sub industry level actually increased energy intensity over the period of 1980 2003 although the structural change at the industry level was very different in the 1980s and in the post 1990 period 3 structural change involving shifts of production between sub sectors however decreased overall energy intensity 4 the increase in energy intensity since 2000 is explained by negative technological progress 5 inter fuel substitution is found to contribute little to the changes in energy intensity

do meetings in smoke filled rooms facilitate collusion the sherman act prohibits firms from discussing prices in meetings traditional thought suggests that this prohibition makes it harder for firms to collude and economists have concluded that the sherman act operates in the public interest i provide an alternative explanation for the act that also accounts for the small sanctions chosen by the legislature when firms interact in a dynamic environment in which the law helps them to prevent renegotiation the firms may benefit from the law that makes it costly but not very costly to meet to discuss prices the sherman act may help firms to collude

endogenous mergers and collusion in asymmetric market structures recent empirical evidence shows that cartels are often asymmetric while cartel theory suggests that firm symmetry is conducive to collusion including an indivisible cost of cartelization we show that medium asymmetric market structures are more conducive to collusion since they balance the small firms incentives to stay in the cartel against the need to cover the cartel leaders indivisible cartelization cost using an endogenous merger model we also show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with a higher risk of collusion current antisymmetry merger policy can thus be counterproductive

optimal cartel pricing in the presence of an antitrust authority the dynamic behavior of a price fixing cartel is explored when it is concerned about creating suspicions that a cartel has formed consistent with preceding static theories the cartel s steady state price is decreasing in the damage multiple and the probability of detection however contrary to those theories it is independent of the level of fixed fines it is also shown that the cartel prices higher when a more competitive benchmark price is used in calculating damages

financial development and energy consumption in central and eastern european frontier economies this study examines the impact of financial development on energy consumption in a sample of 9 central and eastern european frontier economies several different measures of financial development are examined including bank related variables and stock market variables the empirical results obtained from dynamic panel demand models show a positive and statistically significant relationship between financial development and energy consumption when financial development is measured using banking variables like deposit money bank assets to gdp financial system deposits to gdp or liquid liabilities to gdp of the three stock market variables investigated only one stock market turnover has a positive and statistically significant impact on energy consumption both short run and long run elasticities are presented the implications of these results for energy policy are discussed

do economic financial and institutional developments matter for environmental degradation evidence from transitional economies abstract several studies have examined the relationship between environmental degradation and economic growth however most of them did not take into account financial developments and institutional quality moreover stern stern d 2004 the rise and fall of the environmental kuznets curve world development 32 8 1419 1439 noted that there are important econometric weaknesses in the earlier studies such as endogeneity heteroscedasticity omitted variables etc the purpose of this paper is to fill this gap in the literature by investigating the linkage between not only economic development and environmental quality but also financial development and institutional quality we employ the standard reduced form modelling approach to control for country specific unobserved heterogeneity and gmm estimation to control for endogeneity our study considers 24 transition economies and panel data for 1993 2004 our results support the ekc hypothesis while confirming the importance of both institutional quality and financial development for environmental performance we also found that financial liberalization may be harmful for environmental quality if it is not accomplished in a strong institutional framework

does financial development mitigate carbon emissions evidence from heterogeneous financial economies abstract in this paper we investigate the impact of financial market development on carbon emission intensity taking into account the various stages of financial development among countries utilising the instrumental variable generalised method of moment approach and a comprehensive panel dataset of a total of 83 countries over the period 1980 2015 we show that the overall financial market development and its sub measures such as financial market depth and efficiency reduce carbon emission intensity in the developed and emerging financial economies however an opposing effect is found in the frontier financial economies for standalone financial economies the results show that the overall financial market development and its sub indicators have no direct impact on carbon emission intensity finally the non linear and the moderating effects of financial market development on carbon emission intensity differ across countries at different stages of financial development the policy implications are also discussed

the effects of electricity consumption economic growth financial development and foreign direct investment on co2 emissions in kuwait abstract this study examined the empirical effects of economic growth electricity consumption foreign direct investment fdi and financial development on carbon dioxide co2 emissions in kuwait using time series data for the period 1980 2013 to achieve this goal we applied the autoregressive distributed lag ardl bounds testing approach and found that cointegration exists among the series findings indicate that economic growth electricity consumption and fdi stimulate co2 emissions in both the short and long run the vecm granger causality analysis revealed that fdi economic growth and electricity consumption strongly granger cause co2 emissions based on these findings the study recommends that kuwait reduce emissions by expanding its existing carbon capture utilization and storage plants capitalizing on its vast solar and wind energy reducing high subsidies of the residential electricity scheme and aggressively investing in energy research to build expertise for achieving electricity generation efficiency

global cartels leniency programs and international antitrust cooperation in this paper we analyze cartel formation and self reporting incentives when firms operate in several geographical markets and face antitrust enforcement in different jurisdictions we are concerned with the effectiveness of leniency programs and the benefits of international antitrust cooperation between agencies when international antitrust prosecution is uncoordinated multi market contact allows firms to reduce the amount of self reporting in equilibrium and sustain cartels more effectively we then discuss the effects of information sharing among antitrust authorities as a function of how much and which type of information is exchanged we show that extensive information sharing might have an adverse effect on self reporting by cartel members

optimal corporate leniency programs this study characterizes the corporate leniency policy that minimizes the frequency with which collusion occurs though it can be optimal to provide only partial leniency plausible sufficient conditions are provided whereby the antitrust authority should waive all penalties for the first firm to come forward it is also shown that restrictions should be placed on when amnesty is awarded though it can be optimal to award amnesty even when the antitrust authority is very likely to win the case without insider testimony

the influence of real output renewable and non renewable energy trade and financial development on carbon emissions in the top renewable energy countries due to tremendous increase in the level of carbon dioxide co2 emissions in the last several decades a number of studies in the energy growth environment literature have attempted to identify the determinants of co2 emissions a major criticism related to the existing studies we realize is the selection of panel estimation techniques almost all studies use panel methods that ignore the issue of cross sectional dependence even though countries in the panel are most likely heterogeneous and cross sectionally dependent in addition the majority of existing studies use aggregate energy consumption and thus fail to identify the impacts of energy consumption by sources on the environment in order to fulfill the mentioned gaps in the literature this empirical study analyzes the influence of the real income renewable energy consumption non renewable energy consumption trade openness and financial development on co2 emissions in the ekc model for the top countries listed in the renewable energy country attractiveness index by employing heterogeneous panel estimation techniques with cross section dependence we find that the analyzed variables become stationary at their first differences by using the cadf and the cips unit root tests and the analyzed variables are cointegrated by employing the lm bootstrap cointegration test by using the fmols and the dols we also find that increases in renewable energy consumption trade openness and financial development decrease carbon emissions while increases in non renewable energy consumption contribute to the level of emissions and the ekc hypothesis is supported for the top renewable energy countries

fines and reputational sanctions the case of cartels abstract in this article we revive an old debate in the law and economics literature the relative role of public and reputational sanctions in deterring misconduct we propose an empirical framework which accounts for public sanctions in our case cartel fines and a more direct measure of reputational sanctions harnessing recent developments in opinion mining we use the intensity and the sentiment of media exposure of misconduct as a measure of reputational effect and thus approximation of the reputational sanction as a demonstration we combine an event study approach sentiment analysis and econometric techniques on a sample of 339 listed cartel member firms prosecuted by the european commission between 1992 and 2015 our results offer evidence that in the context of cartels public and reputational sanctions act as substitutes where there is a reputational penalty increasing this penalty reduces the effect of the public sanction one the other hand in the absence of a reputational punishment the effect of the cartel fine steps in

the impact of growth energy and financial development on the environment in china a cointegration analysis this article aims to investigate the impact of financial development economic growth and energy consumption on environmental pollution in china from 1953 to 2006 using the autoregressive distributed lag ardl bounds testing procedure the main objective is to examine the long run equilibrium relationship between financial development and environmental pollution the results of the analysis reveal a negative sign for the coefficient of financial development suggesting that financial development in china has not taken place at the expense of environmental pollution on the contrary it is found that financial development has led to a decrease in environmental pollution it is concluded that carbon emissions are mainly determined by income energy consumption and trade openness in the long run moreover the findings confirm the existence of an environmental kuznets curve in the case of china

do antitrust laws facilitate collusion experimental evidence on costly communication in duopolies bertrand supergames with non binding communication are used to study price formation and stability of collusive agreements on experimental duopoly markets the experimental design consists of three treatments with different costs of communication zero cost low cost and high cost prices are found to be significantly higher when communication is costly moreover costly communication decreases the number of messages but more importantly it enhances the stability of collusive agreements mccutcheon 1997 presents an interesting application to antitrust policy by letting the cost of communication symbolize the presence of an antitrust law that prohibits firms from discussing prices although our experimental results do not support the mechanism of mccutcheon s 1997 argument the findings point in the direction of her prediction that antitrust laws might work in the interest of firms

multi market collusion with demand linkages and antitrust enforcement this paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand related markets we show that cartel prosecution can have a knock on effect bringing down a cartel in one market reduces profits and cartel stability and leads to the break up of the cartel in the adjacent market cartel prosecution can also have a waterbed effect disrupting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets we discuss the impact of dynamic cartel formation on consumer surplus explore antitrust spillovers the optimal scope of antitrust interventions and cartel formation with local firms

denying leniency to cartel instigators costs and benefits abstract a large number of countries have introduced successful leniency programs into their competition law enforcement to encourage colluding firms to come forward with evidence that will help detect cartels and punish price fixers this paper studies a feature of some of these programs that has received relatively little attention in the literature the inclusion of no immunity for instigators clauses niics these provisions deny leniency benefits to parties that instigate cartel behavior or function as cartel ringleaders our results show that niics can lead to increased or decreased levels of cartel conduct by removing the instigator s benefit from cooperating with the authorities a niic undoes some of the destabilizing benefit the leniency program was intended to generate and thereby furthers cartel stability on the other hand the instigator faces an asymmetrically severe punishment under a niic and this can reduce the incentive to instigate in the first place

real interest rates expected inflation and the inflation uncertainty premium abstract two index linked bond prices can be used to measure current ex ante real interest rates and expected inflation these values can then be substituted into a nominal bond price equation to solve for the inflation uncertainty premium

sector value addition technology and co2 emissions in saudi arabia abstract this study assesses the environmental kuznets curve ekc hypothesis with the case study of saudi arabia by considering three channels volume of production sector value addition to gdp and technological innovation using a long time series data set and applying autoregressive distributed lags ardl methodology this study nullifies the existence of the ekc hypothesis in the case of saudi arabia the study also provides robust evidence that economic growth fosters co2 emissions linearly the results also present that the value addition of growth in the industrial and service sectors is responsible for faster growth in co2 emissions while agriculture value addition is negatively and insignificantly associated with emissions finally this study shows that technological innovation is insignificant in helping to reduce co2 emissions thus substantial technological progress in the production process would reduce co2 emissions without harming economic growth

the gilts market as an on line window on expected inflation it is argued that government policy could be greatly improved by the existence of a gilts market window on expected inflation the indexed gilts method for measuring expected inflation developed by levin and copeland 1993 is described and extended this extended method is applied to the 41 market days between 20 august 1992 and 15 october 1992 in order to observe how the developing crisis associated with britain s departure from the european exchange rate mechanism affected real interest rates expected inflation and the inflation uncertainty premium the estimates for this period demonstrate that it is technically possible with the indexed gilts method to read the financial markets forecast of the future path of inflation in the uk in addition the estimates show quite clearly that the expected inflation path alters in response to external shocks and to subsequent policy reactions

antitrust and prices this study examines the effects of antitrust prosecution on prices charged by firms indicted for price fixing in a survey of 25 cases filed between 1973 and 1984 prices are found to gradually rise by about 7 percent over the 4 years following an indictment however the severity of penalties is negatively correlated with prices these two findings suggest either that penalties are too lenient or that prosecution is too broad penalizing economically efficient conspiracies along with those that are inefficient

leniency programs for multimarket firms the effect of amnesty plus on cartel formation we examine the effect of amnesty plus on dynamic cartel formation in a multimarket setting the amnesty plus program has been adopted as part of the us corporate leniency policy in 1999 and is now vigorously advertised as one of the most compelling tools in generating successful cartel investigations amnesty plus is aimed at attracting amnesty applications by encouraging firms convicted in one market to report their collusive agreements in other markets we show that amnesty plus has two opposite effects on firms ability and incentives to collude which are both increasing in the fine reduction granted first amnesty plus can reduce the deterrence of cartel activities by making it easier for firms to sustain multimarket collusion through strategies involving self reporting after a first cartel detection second it can reduce the expected duration of cartels or delay their formation by increasing firms incentives to self report after a first cartel detection

what drives the energy saving role of fdi and industrialization in east africa abstract analysis of the unconditional impacts of foreign direct inflows fdis and industrialization on energy intensity does not show the hidden roles of some economic conditions such as income and trade openness in this study we focused on the conditional impacts of fdis and industrialization on energy productivity using a panel data consisting of thirteen 13 east african countries covering 1980 2011 the baseline result shows that higher income and a well integrated economy are pro energy productive but fdis and intense industrialization are anti energy productive in the sub region this result remains robust even when we exclude the high income group and control for income group effects income significantly promotes energy productivity more in low income group than middle income group intense industrialization and fdis significantly decreases energy productivity only in low income countries trade openness significantly promotes energy productivity only in middle income group we have shown that fdis and income intense industrialization and fdis and intense industrialization and globalization are complementary forces that promote energy productivity in east africa but this is more evident for the middle income group than the low income group in the sub region based on the result we recommend a quadruplet programme called the growth industrial foreign investment and trade programme giftp last our result suggests that unconditional analysis of energy productivity should not be seen as an end in itself but a basis for further analysis

the effect of leniency programs on endogenous collusion the objective of a leniency program is to reduce sanctions against collusion if a participant voluntarily confesses his behavior or cooperates with the public authority s investigation constructing a model in which the detection probability varies over time harrington 2008 pointed out that there are three channels through which the leniency program can affect the collusion amount furthermore he presented a sufficient condition under which the maximum leniency is optimal after extending the model by endogenizing the degree of collusion as well as equilibrium selection in the self reporting stage we revealed that the race to the courthouse effect disappears and that the maximum reduction is always optimal

environmental kuznets curve and financial development in pakistan abstract in this study we analyzed the effects of financial development per capita real income the square of per capita real income per capita energy consumption and openness on per capita co 2 emissions for pakistan during 1972 2013 the bound f test for cointegration yielded evidence of a long term relationship among these variables the results confirm the existence of an environmental kuznets curve in pakistan for both the short and long term this finding indicates that at the initial stage of development the level of co 2 increases with income and after some threshold level of income this relationship may change from positive to negative as more efficient infrastructure and energy efficient technology are implemented during the development process of the country the findings of this study also reveal a significantly positive sign for the coefficient of financial development suggesting that financial development has occurred at the expense of environmental quality the results further indicate that the key contributing factors to carbon emissions in pakistan are income energy consumption and financial development in addition the openness variable has no significant influence on carbon emission in either the short or long term

energy intensity and foreign direct investment a chinese city level study article i nfo in this paper we investigate the relationship between the energy intensity of chinese cities and the location of foreign firms employing a unique dataset of 206 of the largest prefecture level cities between 2005 and 2008 our results reveal a non linearinverted u shaped relationship between energy intensity and city level per capita income with the majority of cities on the downward slope of the curve we also find evidence of a significant and negative relationship between the foreign direct investment fdi flows into a city and energy intensity however this effect varies by geographic location reflecting differences in the ability of regions to absorb and benefit from environmental spillovers the relatively small economic effect of fdi can in part explained by the propensity for foreign firms to invest in energy intensive sectors coupled with the trend for china to invest heavily in capital intensive industries

strategic leniency and cartel enforcement the cornerstone of cartel enforcement in the united states and elsewhere is a commitment to the lenient prosecution of early confessors a burgeoning game theoretical literature is ambiguous regarding the impacts of leniency i develop a theoretical model of cartel behavior that provides empirical predictions and moment conditions and apply the model to the complete set of indictments and information reports issued over a 20 year span statistical tests are consistent with the notion that leniency enhances deterrence and detection capabilities the results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime jel d43 l12 l13 k21 in 1993 the department of justice doj introduced a new leniency program with the intent of destabilizing existing cartels and deterring new cartels the program commits the doj to the lenient prosecution of early confessors in particular it guarantees complete amnesty from federal prosecution to the first confessor from each cartel provided that an investigation into the confes sor s cartel is not already underway it also offers discretionary penalty reductions to conspirators who confess when an investigation is already ongoing the new leniency program has become the cornerstone of cartel enforcement efforts in the united states e g scott d hammond 2004 and recently has inspired antitrust authorities in australia canada the european union japan south korea and elsewhere to introduce similar programs oecd 2002 2003 this paper tests the efficacy of the new leniency program the results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime a burgeoning game theoretical literature is ambiguous regarding the impacts of leniency a common finding is that leniency may destabilize cartels because conspirators can simultane

the impact of the 2002 reform of the eu leniency program on cartel outcomes abstract the objective of this study is to empirically assess whether the 2002 reform of the eu leniency program which brought the eu leniency policy much closer to the us policy has increased the european commission s capability to destabilize cartels while making prosecution more efficient more specifically relying on a difference in difference approach we estimate the impact of the 2002 reform on cartel duration fines before and after applying leniency reductions and duration of investigation we find that the 2002 reform decreased cartel duration by about 87 percent but did not significantly affect the other outcome variables thus our findings seem to suggest that the 2002 reform has improved the cartel destabilizing effect of the eu leniency program without enhancing however its effectiveness in prosecuting cartels

deterrence with multiple defendants an explanation for unfair plea bargains this article examines plea bargaining where there are multiple defendants facing a prosecutor the prosecutor s optimal offer to each defendant is shown to depend upon the following two factors i the defendant s ex ante probability of conviction and ii the defendant s ability to increase his co conspirator s probability of conviction furthermore if the ex ante probability of conviction is positively correlated with a defendant s ability to raise his co conspirator s probability of conviction a plea bargain that gives the most culpable defendant the lowest penalty can maximize deterrence

the economics of organized crime and optimal law enforcement this article extends the optimal law enforcement literature to organized crime i model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion as long as extortion is a costless transfer from individuals to the criminal organization not only the existence of extortion is social welfare improving because it makes engaging in a criminal offense less attractive but it also allows the government to reduce expenditures on law enforcement when extortion is costly because the criminal organization resorts to threats and violence the existence of extortion is social welfare diminishing and may lead to higher expenditures on law enforcement

do urbanization and industrialization affect energy intensity in developing countries abstract against a backdrop of concerns about climate change peak oil and energy security issues reducing energy intensity is often advocated as a way to at least partially mitigate these impacts this study uses recently developed heterogeneous panel regression techniques like mean group estimators and common correlated effects estimators to model the impact that income urbanization and industrialization has on energy intensity for a panel of 76 developing countries in the long run a 1 increase in income reduces energy intensity by 0 45 to 0 35 long run industrialization elasticities are in the range 0 07 to 0 12 the impact of urbanization on energy intensity is mixed in specifications where the estimated coefficient on urbanization is statistically significant it is slightly larger than unity the implications of these results for energy policy are discussed

leniency policies and illegal transactions abstract 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 find 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

fisher s paradox and the theory of interest irving fisher s theory of interest has proved to be a most durable and influential contribution to economic theory a central element of fisher s contribution is the fisher hypothesis that over the longer term the real rate of interest is approximately constant being determined largely by time preference with movements in the nominal interest rate reflecting movements in the rate of inflation one for one the paradox of the fisher hypothesis is that despite its wide acceptance as the cornerstone of interest rate theory most empirical evidence appears to be inconsistent with the hypothesis at least in its strictest form this empirical anomaly was noted by fisher himself who attributed it to money illusion in the fifty years following the publication of the theory of interest a considerable literature has evolved around this paradox the unifying theme of this literature is a common acceptance of the essence of fisher s hypothesis most of the energy in this literature has been devoted to explaining systematic movements in the real rate of interest and to providing reasons why the relationship between the nominal interest rate and inflation may only be approximate in

the firm as a communication network this paper analyzes how organizations can minimize costs of processing and communicating information communication is costly because it takes time for an agent to absorb new information sent by others agents can reduce this time by specializing in the processing of particular types of information when these returns to specialization outweigh costs of communication it is efficient for several agents to collaborate within a firm it is shown that efficient networks involve centralization that individuals delegate tasks to subordinates only if they are overloaded and that the number of transits to the top tends to be equalized across individual information items

cartel pricing dynamics in the presence of an antitrust authority cartel pricing is characterized when firms are concerned about creating suspicions that a cartel has formed balancing concerns about maintaining the stability of the cartel with those of avoiding detection the cartel may either i gradually raise price to its steady state level or ii gradually raise price and then have it decline to its steady state level antitrust laws may have a perverse effect as they make cartel stability easier and thus allow for higher cartel prices

cartel pricing dynamics with cost variability and endogenous buyer detection this paper characterizes collusive pricing patterns when buyers may detect the presence of a cartel buyers are assumed to become suspicious when observed prices are anomalous we find that the cartel price path is comprised of two phases during the transitional phase price is generally rising and relatively unresponsive to cost shocks during the stationary phase price responds to cost but is much less sensitive than under non collusion or simple monopoly the length of the transition phase is decreasing in the variance of cost shocks it is also shown that the cartel price path may overshoot its long run level so that price converges from above

the real thing a dynamic profile of the term structure of real interest rates and inflation expectations in the united kingdom 1982 89 this article estimates real interest rates and inflation expectations from market observable data without assuming anything about the form of agents expectation formation mechanism by examining prices of index linked and conventional gilt edged securities form the u k bond market real interest rates and inflation expectations are computed quarterly beginning 1982 2 for up to fourteen maturities ranging from 1988 to 2024 copyright 1990 by the university of chicago

the impact of leniency and whistle blowing programs on cartels antitrust authorities have set up leniency programs for cartel members that denounce their collusive agreements these programs help prosecute participants and can thereby deter collusion we compare the impact of reduced fines and positive rewards and argue that rewarding individuals including firm employees can deter collusion in a more effective way we discuss possible adverse effects of whistle blowing programs on firms behavior and particularly on turnover incentives to innovate and cooperation we also explore explanations for the puzzling fact that managers keep incriminating evidence and argue reward programs actually provide additional incentives for keeping such evidence

the effect of increasing exports on industrial energy intensity in china abstract given china s heavy reliance on fuel energy and the dominance of its industrial sector in the economy improving energy efficiency remains one of the practical means for the country to decrease energy intensity and to fulfill its commitment made at the copenhagen climate change conference to achieve a 40 45 percent reduction in co 2 emission intensity by 2020 this study investigates the impact of exports on industrial energy intensity to explore the possibility of reducing energy intensity through greater exports a panel varying coefficient regression model with a dataset of china s 20 industrial sub sectors over 1999 2007 suggests that in general greater exports aggravate energy intensity of the industrial sector and that great divergences exist in the impact of exports on energy intensity across sub sectors a panel threshold model further estimates the thresholds for the major determinants of energy intensity exports input in technological innovations and foreign direct investment fdi intensity given the great differences in specific sub sector characteristics and the changing roles played by different factors across sub sectors there is no general export policy that would work for all sub sectors in reducing sub sector energy intensity instead policies and measures aiming to encourage more efficient use of energy should take into full consideration the characteristics and situations of individual sub sectors

the impact of financial development on energy consumption in emerging economies abstract financial development is often cited as a very important driver of economic growth in emerging economies and it is thus likely that financial development affects energy demand this study uses generalized method of moments estimation techniques to examine the impact of financial development on energy consumption in a sample of emerging countries several different measures of financial development are examined using a panel data set on 22 emerging countries covering the period 1990 2006 the empirical results show a positive and statistically significant relationship between financial development and energy consumption when financial development is measured using stock market variables like stock market capitalization to gdp stock market value traded to gdp and stock market turnover the implications of these results for energy policy are discussed

does higher economic and financial development lead to environmental degradation evidence from bric countries abstract a vast number of studies addressed the environmental degradation and economic development but not financial development moreover as argued by stern 2004 the rise and fall of the environmental kuznets curve world development 32 1419 1439 they present important econometric weaknesses using standard reduced form modeling approach and controlling for country specific unobserved heterogeneity we investigate the linkage between not only economic development and environmental quality but also the financial development panel data over period 1992 2004 is used we find that both economic and financial development are determinants of the environmental quality in bric economies we show that higher degree of economic and financial development decreases the environmental degradation our analysis suggests that financial liberalization and openness are essential factors for the co 2 reduction the adoption of policies directed to financial openness and liberalization to attract higher levels of r d related foreign direct investment might reduce the environmental degradation in countries under consideration in addition the robustness check trough the inclusion of us and japan does not alter our main findings

accomplice witnesses and organized crime theory and evidence from italy we develop an agency model of organized crime accounting for the main trade offs involved in the introduction of an accomplice witness program we characterize the optimal policy and identify its main determinants in a framework where public officials can be dishonest our predictions are tested by using data for italy before and after the introduction of the 1991 accomplice witness program as predicted by the model and the earlier antitrust literature the program appears to have strengthened deterrence and enhanced prosecution moreover consistent with a novel prediction of our theory the evidence suggests that the program efficacy is affected by the judicial system efficiency

are leniency programs too generous i present a simple model of collusion in which the competition authority offers leniency rates contingent on the number of firms that report information the optimal leniency policy involves what i refer to as a single informant rule that is leniency should be given only when a single firm reports information the single informant rule allows to increase expected sanctions compared to the first informant rule which overall improves cartel deterrence

price leadership and unequal market sharing collusion in experimental markets abstract we consider experimental markets of repeated homogeneous price setting duopolies we investigate the effect on collusion of sequential versus simultaneous price setting we also examine the effect on collusion of changes in the size of each subject s market share in case both subjects set the same price our results show that sequential price setting compared with simultaneous price setting facilitates collusion if subjects have equal market shares or if the follower has the larger market share with sequential price setting we find more collusion if subjects have equal market shares rather than unequal market shares we observe more collusion if the follower has the larger market share than if the follower has the smaller market share

self reporting investigation and evidentiary standards abstractself reporting schemes have become a substantial part of law enforcement this paper analyzes the optimal use of such schemes when the authority cannot commit to an ex post investigation effort i show that this leads to a negative relationship between self reporting incentives and investigation effort three main conclusions arise first violators self report with a probability of 1 if and only if full amnesty is offered second self reporting schemes are not efficient when the level of harm of the act is high finally authorities can increase the incentives to self report when they convict without hard evidence however a hard evidence standard provides more deterrence and is weakly welfare superior

the rise of economics in competition policy a canadian perspective competition policy in canada and elsewhere has changed remarkably over the last 50 yearsin large measure due to advances in economics in this article we trace the impact of developments in industrial organization on the three central areas of competition policy cartels single firm conduct and mergers we focus on canadian competition policy but draw comparisons with developments in the united states and europe

how to organize crime in criminal organizations diffusing information widely throughout the organization might lead to greater internal efficiency in particular since these organizations are self sustaining through enhancing trust however this may come at the cost of leaving the organization more vulnerable to external threats such as law enforcement we consider the implications of this trade off and characterize the optimal information structure rationalizing both hierarchical structures and organization in cells then we focus on the role of the external authority characterize optimal detection strategies and discuss the implications of different forms of enforcement on the internal structure of the organization and policy finally we discuss a number of applications and extensions in this paper we study the interplay between trust within an illegal organization and its vulnerability to the authorities illegal organizations function more effectively when the people who constitute them trust each other we argue that information sharing is an important factor in building internal trust and cohesion but that can leave the organization vulnerable understanding how this trade off affects an organization s information structure and productivity can allow us to assess detection policies designed to destabilize such organizations since 9 11 the u s congress has passed a 400 billion annual budget for the war on terror new domestic institutions have been created or enhanced among many others the counterterrorism section at the u s department of justice s criminal division international intelligence cooperation has been strengthened and new protocols and controversial legal tools such as the patriot act have been developed however these new agencies and institutions face the same basic questions that have challenged the prosecutors fighting organized crime in italy south america and eastern asia as well as authorities fighting terrorism all over the world now and in the past how can we learn about the internal structure of criminal organizations how should we go about investigating a criminal organization in order to break its internal cohesion how does a criminal organization react to investigation policies we highlight the fact that simply understanding the information links within an organization gives us insight into addressing these questions the anecdotal evidence suggests that there is a wide heterogeneity across the information structures of different criminal organizations the most credited theory about the mafia developed in the early 1990 s has identified the so called cupola as the highest level of the organization supposedly consisting of agents who hold large amounts of information about the organization itself and carry out the enforcement needed for the organization to function 2 these crucial agents are shielded from the authorities since they are typically not directly involved in criminal activities this theory suggests a centralized information and enforcement structure 1 previous drafts have circulated under the titles power and organizational structure under an external threat

effects of changing trade structure and technical characteristics of the manufacturing sector on energy intensity in ghana abstract this study examined the effects of changing trade structure and changing technical characteristics of the manufacturing sector alongside the effects of foreign direct investment and urbanization on energy intensity in ghana in order to produce a result that is not biased towards non rejection the zivot andrews unit root test with structural break was used the study applied the phillip hansen park and stock watson cointegration models which are more robust to serial correlation and exogeneity problems preliminary findings showed evidence of cointegration the study concludes that the changing technical characteristics of the manufacturing sector after the reform and changing production mix in favor of less energy intensive improved energy efficiency however energy consumption via exports which outweighed the energy saving via imports of capital goods after the reform in 1983 worsened energy efficiency growing urbanization significantly increases energy intensity in all technological diffusion via trade exerts significant influence on energy intensity than technological diffusion via foreign direct investment these results are robust to the cholesky variance decomposition analysis

the evolution of cooperation in infinitely repeated games experimental evidence 1 for example in infinitely repeated prisoner s dilemma games with patient agents both cooperate and defect may be played in equilibrium even though the theory of infinitely repeated games has been used to explain cooperation in a variety of environments no definitive solution has been provided to the problem of equilibrium selection when both cooperation and defection are possible equilibrium outcomes which one should we expect to prevail previous experimental evidence has shown that subjects often fail to coordinate on a specific equilibrium when they play a small number of infinitely repeated games some subjects attempt to establish cooperative agreements while others defect but how would behavior evolve as subjects learn from previous repeated games would cooperation prevail when it can be supported in equilibrium or will subjects learn

what price coordination the efficiency enhancing effect of auctioning the right to play a model is proposed to explain the results of recent experiments in which subjects repeatedly played a coordination game with the right to play auctioned each period in a larger group subjects bid the market clearing price to a level recoverable only in the efficient equilibrium and then converged to that equilibrium although subjects playing the game without auctions converged to inefficient equilibria the efficiency enhancing effect of auctions is reminiscent of forward induction but is not explained by equilibrium refinements the model explains it by showing how strategic uncertainty interacts with history dependent learning dynamics to determine equilibrium selection copyright 1998 by american economic association

legalizing bribe giving i introduction corruption remains an endemic problem in the developing world and has become a central political issue in many countries empirical work has considerably advanced our understanding of how widespread corruption is and how it can cause harm 1 governments and agencies such as the world bank have sponsored numerous anticorruption programs however regarding how to best fight corruption in practice research has lagged behind policy 2 recently kaushik basu chief economist then of the indian government and now of the world bank proposed a specific approach in basu s 2011 pamphlet why for a class of bribes the act of giving a bribe should be treated as legal he describes a society where bribery is rampant a scourge that deserves to be banished and proposes for the case of harassment bribes that people pay to get services they are legally entitled to 3 the following policy legalize bribe giving double the fine for bribe taking and make the bribe taker pay back the bribe if discovered when a citizen bribes a bureaucrat under traditional law the two become partners in crime they thus lack incentives to report the activity under basu s policy bp which he deems fairly radical incentives are provided for the bribe giver to report the bribe taker if this is foreseen the bureaucrat would not accept the bribe in the first place that is the key idea will it work a hot debate has raged in indian and international press the economist appeared sympathetic 4 however in some quarters the proposal stirred outrage and commentators discarded it mainly on moral grounds 5 more tempered thoughtful criticism has come from economists dreze 2011 in particular wrote a penetrating comment arguing that basu does not give adequate attention to some institutional and moral concerns which may change conclusions basu s intriguing presentation is informal as is the heated debate it inspired perhaps one should not expect the issues to be easily settled through such discourse the proposal is reminiscent of somewhat analogous tools used in other fields such as leniency policies in antitrust and whistleblower protection and reward schemes against fraud and organized crime scholars who studied those measures have suggested they may be effective if well designed and administered but counterproductive if details are not set right 6 deeper understanding of the pros and cons of subtle legal rules may require careful scrutiny within a formal model in section ii we develop a simple formal model to represent the scenarios basu and his commentators care about as explicit games by comparing equilibria we draw conclusions regarding the conditions under which bp is likely to be effective bp gets mixed context dependent grades and we highlight complementarities with other policies the proposal works best if coupled with measures that increase the costs for bureaucrats of denying citizens what they deserve and that reduce the costs for citizens of getting justice verifying whether a bribe was paid entails costs which may deter reporting hence bp works better against larger bribes inefficient or corrupt law enforcement increases these costs so bp will be more effective if it is part of a wider reform package that also fosters independence and accountability of the legal system in section iii we take into account also the legal and moral considerations brought up by dreze revealing other problems related to bp we propose a modified policy mbp that escapes many objections the idea is inspired by leniency rules in antitrust rather than legalize bribe giving only those who report having paid a bribe would be awarded legal immunity extortionary harassment bribes are distortive when they are not paid because a justified and presumably welfare enhancing licence is then not issued with other arguably often more serious forms of corruption distortions occur when bribes are paid not otherwise

asset markets as an equilibrium selection mechanism coordination failure game form auctions and tacit communication abstract in this paper we explore the possibility that asset markets provide a means of tacit communication which may allow subjects to coordinate on the payoff dominant equilibrium in an underlying coordination game we find that the existence of a market price for the right to play does communicate information about the equilibrium selection problem specifically behavior never converged to the efficient outcome when subjects were endowed with the right to participate but always converged to the efficient outcome when subjects purchased the right to participate journal of economic literature classification numbers c720 g120

does auctioning of entry licences induce collusion an experimental study we use experiments to examine whether the auctioning of entry rights affects the behaviour of market entrants standard economic arguments suggest that the licence fee paid at the auction will not affect pricing since it constitutes a sunk cost this argument is not uncontested though and this paper puts it to an experimental test our results indicate that an auction of entry licences has a significant positive effect on average prices in oligopoly but not in monopoly these results are consistent with the conjecture that entry fees induce players to take more risk in pursuit of higher expected profits in oligopoly entry fees increase the probability that the market entrants coordinate on a collusive price path in monopoly taking more risk does not make sense since average prices are already close to the profit maximizing price

prosecution and leniency programs the role of bluffing in opening investigations this paper characterizes the optimal investigation and leniency policies when the competition authority is privately informed about the strength of a cartel case i show that the competition authority can then exploit firms uncertainty about the risk of conviction to obtain confessions even when the case is weak more generally i show that offering full leniency allows the competition authority to open more successful investigations what i refer to as the activism effect of leniency which overall raises both cartel desistance and cartel deterrence finally i discuss the policy implications of the model

the impacts of energy prices on energy intensity evidence from china in this paper we present a review of the deregulation of energy prices in china between 1985 and 2004 and assess the impacts of changes in energy prices on aggregate energy intensity and coal oil electricity intensity we used time series data to provide estimates of energy price elasticities empirical results showed that 1 the own price elasticities of coal oil and aggregate energy were negative in periods both before and after 1995 implying that higher relative prices of different energy types lead to the decrease in coal oil and aggregate energy intensities however the positive own price elasticity of electricity after 1995 probably indicates that the price effect was weaker than other factors such as income effect and population effect 2 the impacts of energy prices were asymmetric over time 3 sectoral adjustment also drove the decrease in aggregate energy intensity although raising energy prices to boost efficiency of energy use seems to be an effective policy tool other policy implications concerned with energy prices such as energy supply security and fuel poverty must also be considered

the impact of financial development on carbon emissions an empirical analysis in china given the complexity between china s financial development and carbon emissions this paper uses some econometric techniques including cointegration theory granger causality test variance decomposition etc to explore the influence of financial development on carbon emissions results indicate that first china s financial development acts as an important driver for carbon emissions increase which should be taken into account when carbon emissions demand is projected second the influence of financial intermediation scale on carbon emissions outweighs that of other financial development indicators but its efficiency s influence appears by far weaker although it may cause the change of carbon emissions statistically third china s stock market scale has relatively larger influence on carbon emissions but the influence of its efficiency is very limited this to some extent reflects the relatively lower liquidity in china s stock markets finally among financial development indicators china s fdi exerts the least influence on the change of carbon emissions due to its relatively smaller volume compared with gdp but it is mainly utilized in carbon intensive sectors now therefore with the increase of china s fdi in the future many efforts should be made to adapt its utilizing directions and play its positive role in promoting low carbon development