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Effects of Leniency Programs on Cartel Stability

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  • Motchenkova, E.

    (Tilburg University, TILEC)

Abstract

This paper studies the effect of leniency programs on the stability of cartels under two different regimes of fines, fixed and proportional.We analyze the design of self-reporting incentives, having a group of defendants.Moreover, we consider a dynamic setup, where accumulated (not instantaneous) benefits and losses from crime are taken into account.We obtain that cartel occurrence is less likely if the rules of the leniency programs are more strict and the procedure of application for leniency is more confidential.Moreover, we conclude that, when the procedure of application for leniency is not confidential and penalties and rate of law enforcement are low, leniency may increase duration of cartel agreements.Surprisingly, under a fixed penalty scheme the introduction of a leniency program cannot improve the effectiveness of antitrust enforcement when the procedure of application for leniency is not confidential.
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Suggested Citation

  • Motchenkova, E., 2004. "Effects of Leniency Programs on Cartel Stability," Discussion Paper 2004-020, Tilburg University, Tilburg Law and Economic Center.
  • Handle: RePEc:tiu:tiutil:20443b22-326b-4ff4-b785-014681a0fda3
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    1. Garoupa, Nuno, 2001. "Optimal magnitude and probability of fines," European Economic Review, Elsevier, vol. 45(9), pages 1765-1771, October.
    2. 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.
    3. Innes, Robert, 1999. "Remediation and self-reporting in optimal law enforcement," Journal of Public Economics, Elsevier, vol. 72(3), pages 379-393, June.
    4. Motchenkova, E. & Kort, P.M., 2004. "Analysis of the Properties of Current Penalty Schemes for Violations of Antitrust Law," Discussion Paper 2004-97, Tilburg University, Center for Economic Research.
    5. Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 383-401.
    6. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-295, September.
    7. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June.
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