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Trust and Recidivism; the Partial Success of Corporate Leniency Program in the Laboratory

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  • Jeroen Hinloopen

    ()
    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

  • Adriaan Soetevent

    ()
    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

Abstract

An experiment is conducted were subjects interact repeatedly to examine the effect of a particular leniency program on cartel formation, cartel stability and cartel recidivism. The program leads to lower prices for three reasons. First, non-cooperators are more persistent in their behavior which effectively blocks cartel formation in their respective groups. Second, members of groups that do form a cartel defect more often thus reducing the average cartel lifetime. Third, the difference between the agreed-upon price and the undercutting price is larger. The leniency program does not however affect the probability that a dismantled cartel is re-established.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-067/1.

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Date of creation: 01 Aug 2006
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Handle: RePEc:dgr:uvatin:20060067

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Related research

Keywords: cartels; corporate leniency programs; Bertrand competition; experiment;

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References

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  1. Ghosal, Vivek, 2007. "Regime Shift in Antitrust," MPRA Paper 5460, University Library of Munich, Germany.
  2. Connor, John M., 2005. "Extraterritoriality of the Sherman Act and Deterrence of Private International Cartels," 2005 Annual meeting, July 24-27, Providence, RI 19499, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Motta, Massimo & Polo, Michele, 2000. "Leniency Programs and Cartel Prosecution," CEPR Discussion Papers 2349, C.E.P.R. Discussion Papers.
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  5. Charles F. Mason & Owen R. Phillips, 2002. "In Support of Trigger Strategies: Experimental Evidence from Two-Person Noncooperative Games," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 685-716, December.
  6. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  7. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  8. Apesteguia, Jose & Dufwenberg, Martin & Selten, Reinhard, 2003. "Blowing the Whistle," Research Papers in Economics 2003:5, Stockholm University, Department of Economics.
  9. Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-36, August.
  10. McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-50, April.
  11. Spagnolo, Giancarlo, 2006. "Leniency and Whistleblowers in Antitrust," CEPR Discussion Papers 5794, C.E.P.R. Discussion Papers.
  12. John M. Connor, 2003. "Private International Cartels: Effectiveness, Welfare, and Anticartel Enforcement," Working Papers 03-12, Purdue University, College of Agriculture, Department of Agricultural Economics.
  13. Spagnolo, Giancarlo, 2004. "Divide et Impera: Optimal Leniency Programmes," CEPR Discussion Papers 4840, C.E.P.R. Discussion Papers.
  14. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
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Cited by:
  1. Jeroen Hinloopen, 2005. "The Pro-collusive Effect of Increasing the Repose Period for Price Fixing Agreements," Tinbergen Institute Discussion Papers 05-104/1, Tinbergen Institute.
  2. Hinloopen, Jeroen, 2006. "Internal cartel stability with time-dependent detection probabilities," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1213-1229, November.

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