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Maximal Cartel Pricing and Leniency Programs

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Author Info

  • Houba, H.E.D.
  • Motchenkova, E.
  • Wen, Q.

    (Tilburg University, Tilburg Law and Economics Center)

Abstract

For a general class of oligopoly models with price competition, we analyze the impact of ex-ante leniency programs in antitrust regulation on the endogenous maximal-sustainable cartel price. This impact depends upon industry characteristics including its cartel culture. Our analysis disentangles the effects of traditional antitrust regulation and the leniency program. Ex-ante leniency programs are effective if and only if these offer substantial rewards to the self-reporting firm. This is in contrast to currently employed programs that are therefore ineffective.

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Bibliographic Info

Paper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2008-046.

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Date of creation: 2008
Date of revision:
Handle: RePEc:dgr:kubtil:2008046

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Web page: http://www.tilburguniversity.nl/tilec/

Related research

Keywords: Cartel; Antitrust Policy; Antitrust Law; Leniency Program; Self-reporting; re-peated game;

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References

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  1. Joseph E Harrington, 2001. "Optimal Cartel Pricing in the Presence of an Antitrust Authority," Economics Working Paper Archive 460, The Johns Hopkins University,Department of Economics, revised Jul 2002.
  2. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  3. Motchenkova, E., 2004. "Effects of Leniency Programs on Cartel Stability," Discussion Paper 2004-98, Tilburg University, Center for Economic Research.
  4. Joseph E Harrington Jr & Joe Chen, 2002. "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection," Economics Working Paper Archive 514, The Johns Hopkins University,Department of Economics, revised Sep 2004.
  5. Massimo Motta & Michele Polo, . "Leniency Programs and Cartel Prosecution," Working Papers 150, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Bosch, Jean-Claude & Eckard, E Woodrow, Jr, 1991. "The Profitability of Price Fixing: Evidence from Stock Market Reaction to Federal Indictments," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 309-17, May.
  7. Hinloopen, Jeroen, 2006. "Internal cartel stability with time-dependent detection probabilities," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1213-1229, November.
  8. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  9. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
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Cited by:
  1. 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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