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Effects of Leniency Programs on Cartel Stability

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  • Motchenkova, E.

    (Tilburg University, Center for Economic Research)

Abstract

This paper studies the effect of leniency programs on the stability of cartels under two different regimes of fines, fixed and proportional.We analyze the design of self-reporting incentives, having a group of defendants.Moreover, we consider a dynamic setup, where accumulated (not instantaneous) benefits and losses from crime are taken into account.We obtain that cartel occurrence is less likely if the rules of the leniency programs are more strict and the procedure of application for leniency is more confidential.Moreover, we conclude that, when the procedure of application for leniency is not confidential and penalties and rate of law enforcement are low, leniency may increase duration of cartel agreements.Surprisingly, under a fixed penalty scheme the introduction of a leniency program cannot improve the effectiveness of antitrust enforcement when the procedure of application for leniency is not confidential.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2004-98.

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Date of creation: 2004
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Handle: RePEc:dgr:kubcen:200498

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  1. Garoupa, Nuno, 2001. "Optimal magnitude and probability of fines," European Economic Review, Elsevier, vol. 45(9), pages 1765-1771, October.
  2. José Apesteguia & Martin Dufwenberg & Reinhard Selten, 2003. "Blowing the Whistle," Bonn Econ Discussion Papers bgse9_2003, University of Bonn, Germany.
  3. Massimo Motta & Michele Polo, . "Leniency Programs and Cartel Prosecution," Working Papers 150, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-95, September.
  5. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  6. Motchenkova, E. & Kort, P.M., 2004. "Analysis of the Properties of Current Penalty Schemes for Violations of Antitrust Law," Discussion Paper 2004-97, Tilburg University, Center for Economic Research.
  7. Reinganum, Jennifer F, 1981. "On the Diffusion of New Technology: A Game Theoretic Approach," Review of Economic Studies, Wiley Blackwell, vol. 48(3), pages 395-405, July.
  8. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June.
  9. Innes, Robert, 1999. "Remediation and self-reporting in optimal law enforcement," Journal of Public Economics, Elsevier, vol. 72(3), pages 379-393, June.
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Citations

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Cited by:
  1. Joseph E. Harrington, Jr & Joe Chen, 2005. "he Impact of the Corporate Leniency Program on Cartel Formation and the Cartel Price Path," Economics Working Paper Archive 528, The Johns Hopkins University,Department of Economics.
  2. Patrice Bougette & Christian Montet & Florent Venayre, 2006. "L'efficacité économique des programmes de clémence," Post-Print halshs-00476807, HAL.
  3. Tim Reuter, 2012. "Private antitrust enforcement revisited: The role of private incentives to report evidence to the antitrust authority," Working Paper Series of the Department of Economics, University of Konstanz 2012-04, Department of Economics, University of Konstanz.
  4. Alfredo Burlando & Alberto Motta, 2007. "Self Reporting reduces corruption in law enforcement," "Marco Fanno" Working Papers 0063, Dipartimento di Scienze Economiche "Marco Fanno".
  5. Agisilaou, Panayiotis, 2012. "Keep to sustain or keep to exploit? Why firms keep hard evidence," MPRA Paper 39109, University Library of Munich, Germany.
  6. Harold Houba & Evgenia Motchenkova & Quan Wen, 2008. "Maximal Cartel Pricing and Leniency Programs," Tinbergen Institute Discussion Papers 08-120/1, Tinbergen Institute.
  7. Leliefeld, D. & Motchenkova, E., 2007. "To Protect in Order to Serve: Adverse Effects of Leniency Programs in View of Industry Asymmetry," Discussion Paper 2007-007, Tilburg University, Tilburg Law and Economic Center.
  8. Agisilaou, Panayiotis, 2011. "Keep to sustain or keep to exploit? Why firms keep hard evidence," MPRA Paper 30963, University Library of Munich, Germany.
  9. Evgenia Motchenkova & Rob Laan, 2011. "Strictness of leniency programs and asymmetric punishment effect," International Review of Economics, Springer, vol. 58(4), pages 401-431, December.

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