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The Effects of Private Damage Claims on Cartel Activity: Experimental Evidence

Author

Listed:
  • Olivia Bodnar
  • Melinda Fremerey
  • Hans-Theo Normann
  • Jannika Schad

Abstract

Private damage claims against cartels may have negative effects on leniency: whereas whistleblowers obtain full immunity regarding the public cartel fines, they have no or only restricted protection against private third-party damage claims. This may stabilize cartels. We run an experiment to study this issue. Firms choose whether to join a cartel, may apply for leniency afterward, and then potentially face private damages. We find that the implementation of private damage claims reduces cartel formation but makes cartels indeed more stable. The negative effect of damages is avoided in a novel setting where the whistleblower is also protected from damages (JEL C90, L41, L44).

Suggested Citation

  • Olivia Bodnar & Melinda Fremerey & Hans-Theo Normann & Jannika Schad, 2023. "The Effects of Private Damage Claims on Cartel Activity: Experimental Evidence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 39(1), pages 27-76.
    • Handle: RePEc:oup:jleorg:v:39:y:2023:i:1:p:27-76.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewab010
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    Citations

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    Cited by:

    1. Catarina Marvão & Giancarlo Spagnolo, 2023. "Leniency Inflation, Cartel Damages, and Criminalization," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(2), pages 155-186, September.
    2. Jeong Yeol Kim & Charles N. Noussair, 2023. "Leniency Policies and Cartel Success: An Experiment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(2), pages 187-210, September.
    3. Jeroen Hinloopen & Sander Onderstal & Adriaan Soetevent, 2023. "Corporate Leniency Programs for Antitrust: Past, Present, and Future," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(2), pages 111-122, September.

    More about this item

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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