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Maximal Cartel Pricing and Leniency Programs

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Author Info

  • Harold Houba

    ()
    (VU University Amsterdam)

  • Evgenia Motchenkova

    ()
    (VU University Amsterdam)

  • Quan Wen

    ()
    (Vanderbilt University, Nashville (TN), USA)

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 Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-120/1.

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Date of creation: 17 Dec 2008
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Handle: RePEc:dgr:uvatin:20080120

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Web page: http://www.tinbergen.nl

Related research

Keywords: Cartel; Antitrust Policy; Antitrust Law; Antitrust regulation; Leniency program; Self-reporting; repeated game;

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References

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  1. Motchenkova, E., 2004. "Effects of Leniency Programs on Cartel Stability," Discussion Paper 2004-98, Tilburg University, Center for Economic Research.
  2. Motta, M. & Polo, M., 1999. "Leniency Programs and Cartel Prosecution," Economics Working Papers eco99/23, European University Institute.
  3. Hinloopen, Jeroen, 2006. "Internal cartel stability with time-dependent detection probabilities," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1213-1229, November.
  4. 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.
  5. Joseph E. Harrington, Jr. & Joe Chen, 2005. "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection," CIRJE F-Series CIRJE-F-359, CIRJE, Faculty of Economics, University of Tokyo.
  6. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  7. 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, 02.
  8. 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.
  9. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
  10. 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.
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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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