Ulric B. and Evelyn L. Bray Social Sciences Seminar

Abstract: We study the effectiveness of firms' compliance programs by conducting a field experiment in which we disclose to a subset of Japanese firms evidence that the firm is potentially engaging in illegal bid-rigging. We find that the information that we disclose affects the behavior of the treated firms: our test of bid-rigging fails to reject the null of competition for the treated firms after the intervention. We find evidence that this change is not the result of firms ceasing to collude, however. We find evidence that this change is instead the result of active concealment of evidence by cartelizing firms.