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Heterogeneous Penalties and Private Information

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  • Marvão, Catarina

    () (Trinity College Dublin)

Abstract

The theoretical framework of the adequacy or otherwise of fine reductions under the EU and US Leniency Programmes has been explored widely. However, the characteristics of the reporting cartel members remain unexplained. This is the first paper to develop a model where cartel members are heterogeneous in terms of the cartel fine and have private information on the probability of conviction. It is shown that firms which receive higher fines, have a lower equilibrium threshold for reporting. To validate this result and analyze the sources of fine heterogeneity, data for EU and US cartels are used. Being the first reporter is shown to be correlated with recidivism, leadership and reductions received outside the Leniency Programme. Some characteristics of the cartels where reporting occurred are also unveiled. Identifying the characteristics of the reporting firms is vital to dissolve and dissuade cartels and the wider policy implications of these findings are discussed in the paper.

Suggested Citation

  • Marvão, Catarina, 2014. "Heterogeneous Penalties and Private Information," Konkurrensverket Working Paper Series in Law and Economics 2014:1, Konkurrensverket (Swedish Competition Authority).
  • Handle: RePEc:hhs:kkveco:2014_001
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cartels; competition policy; Leniency Programme; private information;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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