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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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    Cited by:

    1. Bochet, Olivier, 2007. "Switching from complete to incomplete information," Journal of Mathematical Economics, Elsevier, vol. 43(6), pages 735-748, August.
    2. Hinloopen Jeroen, 2007. "The Pro-collusive Effect of Increasing the Repose Period for Price Fixing Agreements," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-13, March.
    3. Feess, E. & Walzl, M., 2008. "Quid-pro-quo or winner-takes-it-all? : an analysis of corporate leniency programs and lessons to learn for EU and US policies," Research Memorandum 057, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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    More about this item

    Keywords

    cartels; corporate leniency programs; Bertrand competition; experiment;
    All these keywords.

    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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