IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/13262.html
   My bibliography  Save this paper

The Effectiveness of Leniency Programs when Firms choose the Degree of Collusion

Author

Listed:
  • Emons, Winand

Abstract

An antitrust authority deters collusion using fines and a leniency program. It chooses the probability of an investigation. Firms pick the degree of collusion: The more they collude, the higher are profits, but so is the probability of detection. Firms thus trade-off higher profits against higher expected fines. If firms are sufficiently patient, leniency is ineffective; it may even increase collusion. Increasing the probability of an investigation at low levels does not increase deterrence. Increasing the probability of an investigation at high levels reduces collusion, yet never completely.

Suggested Citation

  • Emons, Winand, 2018. "The Effectiveness of Leniency Programs when Firms choose the Degree of Collusion," CEPR Discussion Papers 13262, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13262
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP13262
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Julien Sauvagnat, 2015. "Prosecution and Leniency Programs: The Role of Bluffing in Opening Investigations," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 313-338, June.
    2. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    3. Bos, Iwan & Davies, Stephen & Harrington, Joseph E. & Ormosi, Peter L., 2018. "Does enforcement deter cartels? A tale of two tails," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 372-405.
    4. Joseph E. Harrington, Jr., 2004. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 651-673, Winter.
    5. repec:dau:papers:123456789/13637 is not listed on IDEAS
    6. Block, Michael Kent & Nold, Frederick Carl, 1981. "The Deterrent Effect of Antitrust Enforcement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 429-445, June.
    7. Marc Blatter & Winand Emons & Silvio Sticher, 2018. "Optimal Leniency Programs When Firms Have Cumulative and Asymmetric Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(3), pages 403-427, May.
    8. Joseph E. Harrington Jr. & Myong-Hun Chang, 2015. "When Can We Expect a Corporate Leniency Program to Result in Fewer Cartels?," Journal of Law and Economics, University of Chicago Press, vol. 58(2), pages 417-449.
    9. Joseph E. Harrington & Myong-Hun Chang, 2009. "Modeling the Birth and Death of Cartels with an Application to Evaluating Competition Policy," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1400-1435, December.
    10. Maria Bigoni & Sven-Olof Fridolfsson & Chloé Le Coq & Giancarlo Spagnolo, 2012. "fines, leniency, and rewards in antitrust," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 368-390, June.
    11. Spagnolo, Giancarlo, 2004. "Divide et Impera: Optimal Leniency Programmes," CEPR Discussion Papers 4840, C.E.P.R. Discussion Papers.
    12. Zhijun Chen & Patrick Rey, 2013. "On the Design of Leniency Programs," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 917-957.
    13. Maria Bigoni & Sven-Olof Fridolfsson & Chloé Le Coq & Giancarlo Spagnolo, 2015. "Trust, Leniency, and Deterrence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(4), pages 663-689.
    14. Brenner, Steffen, 2009. "An empirical study of the European corporate leniency program," International Journal of Industrial Organization, Elsevier, vol. 27(6), pages 639-645, November.
    15. 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.
    16. Harrington, Joseph E. , Jr., 2017. "The Theory of Collusion and Competition Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262036932, December.
    17. Joseph E. Harrington, 2008. "Optimal Corporate Leniency Programs," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 215-246, June.
    18. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
    19. John M. Connor, 2010. "Recidivism Revealed: Private International Cartels 1990-2009," CPI Journal, Competition Policy International, vol. 6.
    20. 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.
    21. Harold Houba & Evgenia Motchenkova & Quan Wen, 2010. "Antitrust enforcement with price-dependent fines and detection probabilities," Economics Bulletin, AccessEcon, vol. 30(3), pages 2017-2027.
    22. Nathan H. Miller, 2009. "Strategic Leniency and Cartel Enforcement," American Economic Review, American Economic Association, vol. 99(3), pages 750-768, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andres, Maximilian & Bruttel, Lisa & Friedrichsen, Jana, 2021. "The leniency rule revisited: Experiments on cartel formation with open communication," International Journal of Industrial Organization, Elsevier, vol. 76(C).
    2. Isogai, Shigeki & Shen, Chaohai, 2023. "Multiproduct firm’s reputation and leniency program in multimarket collusion," Economic Modelling, Elsevier, vol. 125(C).
    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.
    4. Charistos, Konstantinos & Papadopoulos, Konstantinos G., 2022. "Cartel reporting under passive common ownership," Economics Letters, Elsevier, vol. 216(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Isogai, Shigeki & Shen, Chaohai, 2023. "Multiproduct firm’s reputation and leniency program in multimarket collusion," Economic Modelling, Elsevier, vol. 125(C).
    2. Perrotta Berlin, Maria & Spagnolo, Giancarlo & Qin, Bei, 2015. "Leniency, Asymmetric Punishment and Corruption: Evidence from China," SITE Working Paper Series 34, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 25 May 2017.
    3. Catarina Marvão & Giancarlo Spagnolo, 2018. "Cartels and leniency: Taking stock of what we learnt," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 4, pages 57-90, Edward Elgar Publishing.
    4. Marc Blatter & Winand Emons & Silvio Sticher, 2018. "Optimal Leniency Programs When Firms Have Cumulative and Asymmetric Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(3), pages 403-427, May.
    5. 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.
    6. Yannis Katsoulacos & Evgenia Motchenkova & David Ulph, 2023. "Measuring the effectiveness of anti‐cartel interventions in the shadow of recidivism," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2393-2407, June.
    7. Emilie Dargaud & Armel Jacques, 2015. "Endogenous firms’ organization, internal audit and leniency programs," Working Papers 1524, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    8. Marvão, Catarina, 2014. "Heterogeneous Penalties and Private Information," Konkurrensverket Working Paper Series in Law and Economics 2014:1, Konkurrensverket (Swedish Competition Authority).
    9. Jochem, Annabelle & Parrotta, Pierpaolo & Valletta, Giacomo, 2020. "The impact of the 2002 reform of the EU leniency program on cartel outcomes," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    10. Houba Harold & Motchenkova Evgenia & Wen Quan, 2015. "The Effects of Leniency on Cartel Pricing," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(2), pages 351-389, July.
    11. Jun Zhou, 2016. "The Rise and Fall of Cartels with Multi-market Colluders," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(4), pages 381-403, June.
    12. Peter T. Dijkstra & Jonathan Frisch, 2018. "Sanctions and Leniency to Individuals, and its Impact on Cartel Discoveries: Evidence from the Netherlands," De Economist, Springer, vol. 166(1), pages 111-134, March.
    13. Marvao, Catarina, 2014. "Heterogeneous Penalties and Private Information," SITE Working Paper Series 29, Stockholm School of Economics, Stockholm Institute of Transition Economics.
    14. Bos, Iwan & Davies, Stephen & Harrington, Joseph E. & Ormosi, Peter L., 2018. "Does enforcement deter cartels? A tale of two tails," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 372-405.
    15. Sven Heim & Kai Hhschelrath & Ulrich Laitenberger & Yossi Spiegel, 2017. "Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs," Working Papers hal-01952937, HAL.
    16. Jun Zhou, 2016. "The dynamics of leniency application and the knock-on effect of cartel enforcement," Working Papers 13042, Bruegel.
    17. Chen, Zhiqi & Ghosh, Subhadip & Ross, Thomas W., 2015. "Denying leniency to cartel instigators: Costs and benefits," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 19-29.
    18. Joseph E. Harrington Jr. & Myong-Hun Chang, 2015. "When Can We Expect a Corporate Leniency Program to Result in Fewer Cartels?," Journal of Law and Economics, University of Chicago Press, vol. 58(2), pages 417-449.
    19. Giovanni Immordino & Salvatore Piccolo & Paolo Roberti, 2018. "Optimal Leniency and the Organization Design of Group Delinquency," CSEF Working Papers 503, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    20. Ruben Korsten & Andrew Samuel, 2023. "Cartel formation and detection: the role of information costs and disclosure," European Journal of Law and Economics, Springer, vol. 56(1), pages 117-153, August.

    More about this item

    Keywords

    Antitrust; Cartels; Deterrence; Leniency;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:13262. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.