The Effect of Optimal Penalties for Organizations Convicted of Price Fixing in the Presence of Criminal Sanctions for Individuals

Abstract

This chapter examines the nature of optimal price fixing penalties on organizations in the presence of criminal sanctions for individuals employed by convicted firms. In other work, we examined the nature of optimal penalties for firms convicted for price fixing when the only sanction is the one placed on the firm. This chapter expands the economic analysis to examine how optimal organizational sanctions function when individuals employed by the firm are subject to criminal penalties, including incarceration. Our analysis demonstrates how sanctions on individuals can serve to complement firm level expenditures on monitoring and compliance, resulting in better deterrence and lower compliance costs.