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

Author

Listed:
  • 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.

Suggested Citation

  • Jeroen Hinloopen & Adriaan Soetevent, 2006. "Trust and Recidivism; the Partial Success of Corporate Leniency Program in the Laboratory," Tinbergen Institute Discussion Papers 06-067/1, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20060067
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    References listed on IDEAS

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    Cited by:

    1. Bochet, Olivier, 2007. "Switching from complete to incomplete information," Journal of Mathematical Economics, Elsevier, vol. 43(6), pages 735-748, August.
    2. Feess, E. & Walzl, M., 2008. "Quid-pro-quo or winner-takes-it-all? : an analysis of corporate leniency programs and lessons to learn for EU and US policies," Research Memorandum 057, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    3. Hinloopen Jeroen, 2007. "The Pro-collusive Effect of Increasing the Repose Period for Price Fixing Agreements," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-13, March.

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    More about this item

    Keywords

    cartels; corporate leniency programs; Bertrand competition; experiment;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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