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Keep to sustain or keep to exploit? Why firms keep hard evidence

  • Agisilaou, Panayiotis
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    We develop a model wherein collusive firms' decisions to keep or to destroy the hard evidence is endogenous. Unlike previous literature, we assume that the administration of the cartel crucially depends on the existence of the hard evidence. Within this framework, we explore the impact of a leniency program on whether firms' incentives are to destroy or to keep the hard evidence. Moreover, we examine firms' incentives to report or not to report the hard evidence to the antitrust authority. We show that firms may willfully keep the hard evidence, even if a leniency program is not available, in order to enhance the stability of the cartel. Additionally, we prove that firms are more inclined to keep the hard evidence when a leniency program is available. Finally, we demonstrate that firms are more likely to destroy the hard evidence when the collusive profits-fine ratio increases.

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    File URL: https://mpra.ub.uni-muenchen.de/39109/1/MPRA_paper_39109.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39109.

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    Date of creation: 12 Mar 2012
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    Handle: RePEc:pra:mprapa:39109
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    1. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
    2. Buccirossi, Paolo & Spagnolo, Giancarlo, 2005. "Leniency Policies and Illegal Transactions," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 74, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Motta, M. & Polo, M., 1999. "Leniency Programs and Cartel Prosecution," Economics Working Papers eco99/23, European University Institute.
    4. Motchenkova, E., 2004. "Effects of Leniency Programs on Cartel Stability," Discussion Paper 2004-020, Tilburg University, Tilburg Law and Economic Center.
    5. repec:dau:papers:123456789/13637 is not listed on IDEAS
    6. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, March.
    7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, March.
    8. Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-36, August.
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