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Cartel Organization and Antitrust Enforcement

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Author Info
Zhijun () (ESRC Centre for Competition Policy, University of East Anglia)
Abstract

This paper incorporates the economic theory of organizations into the framework of public law enforcement, and characterizes the dual-coalition structure of cartel organization that allows us to highlight the strategic interactions between cartel participants under different antitrust policies. We show that delegation of authorities over collusive decisions from top executives to subordinates can mitigate the temptation of renege on collusive relationships and thus contributes to facilitating collusion. This result parallels the insights in Baker, Gibbons and Murphy (2002, 2006) which find that the optimal allocation of decision rights is to minimize the maximum temptation to renege on relational contracts. Moreover, the efficiency gains of delegation in facilitating collusion can be mitigated when the corporate leniency program is introduced, in particular whenever it is unlikely to detect cartels absent leniency and the corporate liability is muc more significant than individual liability.

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Publisher Info
Paper provided by Centre for Competition Policy, University of East Anglia in its series Working Papers with number 08-21.

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Length: 30 pages
Date of creation: Apr 2008
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Handle: RePEc:ccp:wpaper:wp08-21

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Related research
Keywords: cartel organization; antitrust enforcement; leniency programs;

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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References listed on IDEAS
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  1. Chen, Zhijun & Rey, Patrick, 2007. "On the Design of Leniency Programs," IDEI Working Papers 452, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  2. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February. [Downloadable!] (restricted)
  3. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1999. "Informal Authority in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 56-73, April.
  4. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
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  5. Margaret C. Levenstein & Valerie Y. Suslow, 2006. "What Determines Cartel Success?," Journal of Economic Literature, American Economic Association, vol. 44(1), pages 43-95, March. [Downloadable!] (restricted)
  6. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics. [Downloadable!]
  7. Jonathan Levin, 2003. "Relational Incentive Contracts," American Economic Review, American Economic Association, vol. 93(3), pages 835-857, June. [Downloadable!]
    Other versions:
  8. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics. [Downloadable!]
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