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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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    1. Charles F. Mason & Owen R. Phillips, 2002. "In Support of Trigger Strategies: Experimental Evidence from Two-Person Noncooperative Games," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 685-716, December.
    2. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
    3. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    4. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
    5. 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 531-536, August.
    6. Spagnolo, Giancarlo, 2006. "Leniency and Whistleblowers in Antitrust," CEPR Discussion Papers 5794, C.E.P.R. Discussion Papers.
    7. McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-350, April.
    8. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    9. repec:dau:papers:123456789/13637 is not listed on IDEAS
    10. Dufwenberg, Martin & Gneezy, Uri, 2000. "Price competition and market concentration: an experimental study," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 7-22, January.
    11. John M. Connor, 2004. "Extraterritoriality Of The Sherman Act And Deterrence Of Private International Cartels," Working Papers 04-08, Purdue University, College of Agriculture, Department of Agricultural Economics.
    12. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, pages 1241-1266.
    13. Spagnolo, Giancarlo, 2004. "Divide et Impera: Optimal Leniency Programmes," CEPR Discussion Papers 4840, C.E.P.R. Discussion Papers.
    14. Ghosal, Vivek, 2007. "Regime Shift in Antitrust," MPRA Paper 5460, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    cartels; corporate leniency programs; Bertrand competition; experiment;

    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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