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Jürges, Hendrik

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias


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1935-1682
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Volume 16, Issue 2

Issues

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Competitive Pressure and Corporate Crime

Florian Baumann
  • Center for Advanced Studies in Law and Economics (CASTLE), University of Bonn, Adenauerallee 42–42, 53113 Bonn, Germany
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/ Tim Friehe
  • Corresponding author
  • Public Economics Group, University of Marburg, Am Plan 2, 35037 Marburg, Germany
  • CESifo, Munich, Germany
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Published Online: 2015-12-04 | DOI: https://doi.org/10.1515/bejeap-2015-0064

Abstract

This paper explores the relationship between the intensity of product market competition and firms’ incentives to resort to illegal means to lower their production costs. To this end, our framework combines a crime model à la Becker with a Salop circle. When law enforcement includes a fixed fine for illegal conduct, more intense competition due to a higher number of firms in the industry reduces the prevalence of crime, whereas more intense competition due to better substitutability between products may increase or decrease crime. In contrast, when the fine for corporate crime is proportional to profits, more intense competition unambiguously increases the prevalence of crime. In addition, we discuss the implications of the link between product market competition and corporate crime decisions for market entry and optimal law enforcement and elaborate on the relationship between law enforcement and a firm’s ability to commit to refraining from the use of illegal practices.

Keywords: product market competition; crime; deterrence; fine structure

JEL: K14; K23; L13

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About the article

Published Online: 2015-12-04

Published in Print: 2016-04-01


Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 16, Issue 2, Pages 647–687, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2015-0064.

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