he Impact of the Corporate Leniency Program on Cartel Formation and the Cartel Price Path
Previous research exploring the effect of corporate leniency programs has modelled the oligopoly stage game as a Prisoners?Dilemma. Using numerical analysis, we consider the Bertrand price game and allow the probability of detection and penalties to be sensitive to firms?prices. Consistent with earlier results, a maximal leniency program necessarily makes collusion more difficult. However, we also find that partial leniency programs - such as in the U.S. - can make collusion easier compared to offering no leniency. We also show that even if cartel formation is not deterred, a leniency program can reduce the prices charged by firms.
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