This paper studies the effects of leniency programs on the behavior of firms participating in illegal cartel agreements. The main contribution of the paper is that we consider asymmetric firms. In general, firms differ in size and operate in several different markets. In our model, they form a cartel in one market only. This asymmetry results in additional costs in case of disclosure of the cartel, which are caused by an asymmetric reduction of the sales in other markets due to a negative reputation effect. This modeling framework can also be applied to the case of international cartels, where firms are subject to different punishment procedures according to the laws of their countries, or in situations where following an application for leniency firms are subject to costs other than the fine itself and where these costs depend on individual characteristics of the firm. Moreover, following the rules of existing Leniency Programs, we analyze the effects of the strictness of the Leniency Programs, which reflects the likelihood of getting complete exemption from the fine even in case many firms self-report simultaneously. Our main results are that, first, leniency programs work better for small (less diversified) companies, in the sense that a lower rate of law enforcement is needed in order to induce self-reporting by less diversified firms. At the same time, big (more diversified) firms are less likely to start a cartel in the first place given the possibility of self-reporting in the future. Second, the more cartelized the economy, the less strict the rules of leniency programs should be.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
74.
For technical questions regarding this item, or to correct its listing, contact: (Corry Stuyts).
Related research
Keywords:
Other versions of this item:
Find related papers by JEL classification: K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
José Apesteguia & Martin Dufwenberg & Reinhard Selten, 2003.
"Blowing the Whistle,"
Bonn Econ Discussion Papers
bgse9_2003, University of Bonn, Germany.
[Downloadable!]
Other versions:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)