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The Impact of the Corporate Leniency Program on Cartel Formation and the Cartel Price Path

  • Joe Chen

    (Faculty of Economics, University of Tokyo)

  • Joseph E. Harrington, Jr.

    (Department of Economics, Johns Hopkins University)

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 par-tial leniency programs - such as in the U.S.- can make collusion easier compared too 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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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2005/2005cf358.pdf
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-358.

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Length: 31 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:tky:fseres:2005cf358
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  1. repec:dgr:kubcen:200498 is not listed on IDEAS
  2. Joseph E. Harrington, Jr. & Joe Chen, 2005. "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection," CIRJE F-Series CIRJE-F-359, CIRJE, Faculty of Economics, University of Tokyo.
  3. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  4. Abrantes-Metz, Rosa M. & Froeb, Luke M. & Geweke, John & Taylor, Christopher T., 2006. "A variance screen for collusion," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 467-486, May.
  5. Joseph E Harrington Jr, 2002. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Economics Working Paper Archive 487, The Johns Hopkins University,Department of Economics, revised May 2003.
  6. Joseph E Harrington, 2001. "Optimal Cartel Pricing in the Presence of an Antitrust Authority," Economics Working Paper Archive 460, The Johns Hopkins University,Department of Economics, revised Jul 2002.
  7. Giancarlo Spagnolo, 2004. "Divide et Impera. Optimnal Deterrence Mechanisms Against Cartels and Organized Crime," Econometric Society 2004 North American Winter Meetings 485, Econometric Society.
  8. Motta, M. & Polo, M., 1999. "Leniency Programs and Cartel Prosecution," Economics Working Papers eco99/23, European University Institute.
  9. Harrington, Joseph Jr., 2003. "Some implications of antitrust laws for cartel pricing," Economics Letters, Elsevier, vol. 79(3), pages 377-383, June.
  10. Hay, George A & Kelley, Daniel, 1974. "An Empirical Survey of Price Fixing Conspiracies," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 13-38, April.
  11. Philippe Cyrenne, 1999. "On Antitrust Enforcement and the Deterrence of Collusive Behaviour," Review of Industrial Organization, Springer, vol. 14(3), pages 257-272, May.
  12. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
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