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The effect of leniency programs on endogenous collusion

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  • Park, Sangwon

Abstract

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.

Suggested Citation

  • Park, Sangwon, 2014. "The effect of leniency programs on endogenous collusion," Economics Letters, Elsevier, vol. 122(2), pages 326-330.
  • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:326-330
    DOI: 10.1016/j.econlet.2013.12.014
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    References listed on IDEAS

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    1. Joseph E. Harrington, 2005. "Optimal Cartel Pricing In The Presence Of An Antitrust Authority," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 145-169, February.
    2. Spagnolo, Giancarlo, 2006. "Leniency and Whistleblowers in Antitrust," CEPR Discussion Papers 5794, C.E.P.R. Discussion Papers.
    3. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    4. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    5. Joseph E. Harrington, 2008. "Optimal Corporate Leniency Programs," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 215-246, June.
    6. Spagnolo, Giancarlo, 2004. "Divide et Impera: Optimal Leniency Programmes," CEPR Discussion Papers 4840, C.E.P.R. Discussion Papers.
    7. Joseph E. Harrington Jr, 2013. "Corporate Leniency Programs when Firms have Private Information: The Push of Prosecution and the Pull of Pre-emption," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 1-27, March.
    8. Ikuo Ishibashi & Daisuke Shimizu, 2010. "Collusive behavior under a leniency program," Journal of Economics, Springer, vol. 101(2), pages 169-183, October.
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    More about this item

    Keywords

    Collusion; Antitrust; Leniency program; Self-reporting;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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