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Divide et Impera: Optimal Leniency Programmes

  • Spagnolo, Giancarlo

Leniency programmes (or policies) reduce sanctions against cartel members that self-report to the Antitrust Authority. We focus on their ability to directly deter cartels and analogous criminal organizations by undermining internal trust, increasing individual incentives to ‘cheat’ on partners. Optimally designed ‘courageous’ leniency programmes reward the first party that reports sufficient information with the fines paid by all other parties, and with finitely high fines achieve the first best. ‘Moderate’ leniency programmes that only reduce or cancel sanctions, as implemented in reality, may also destabilize and deter cartels by (a) protecting agents that defect (and report) from fines; (b) protecting them from other agents’ punishment; and (c) increasing the riskiness of taking part to a cartel.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4840.

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Date of creation: Dec 2004
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Handle: RePEc:cpr:ceprdp:4840
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