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Evaluating Leniency with Missing Information on Undetected Cartels: Exploring Time-Varying Policy Impacts on Cartel Duration

  • Zhou, Jun
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    This paper examines the effects of European Commission’s (EC) new leniency program on the EC’s capabilities in detecting and deterring cartels. As a supplementary analysis, the US leniency is studied. I discuss a dynamic model of cartel formation and dissolution to illustrate how changes in antitrust policies and economic conditions might affect cartel duration. Comparative statics results are then corroborated with empirical estimates of hazard functions adjusted to account for both the heterogeneity of cartels and the time-varying policy impacts suggested by theory. Contrary to earlier studies, my statistical tests are consistent with the theoretic predictions that following an efficacious leniency program, the average duration of discovered cartels rises in the short run and falls in the long run. The results shed light on the design of enforcement programs against cartels and other forms of conspiracy.

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    File URL: http://epub.ub.uni-muenchen.de/13201/1/353_01.pdf
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    Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 353.

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    Date of creation: Nov 2011
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    Handle: RePEc:trf:wpaper:353
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    1. Jose Apesteguia & Martin Dufwenberg & Reinhard Selten, 2007. "Blowing the Whistle," Economic Theory, Springer, vol. 31(1), pages 143-166, April.
    2. George Symeonidis, 2002. "The Effects of Competition: Cartel Policy and the Evolution of Strategy and Structure in British Industry," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262194686, June.
    3. Joseph E Harrington Jr & Joe Chen, 2002. "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection," Economics Working Paper Archive 514, The Johns Hopkins University,Department of Economics, revised Sep 2004.
    4. Langus, Gregor & Motta, Massimo, 2007. "The Effect of EU Antitrust Investigations and Fines on a Firm’s Valuation," CEPR Discussion Papers 6176, C.E.P.R. Discussion Papers.
    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. Rey, Patrick, 2002. "Towards a Theory of Competition Policy," IDEI Working Papers 121, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Harrington, Joseph Jr., 1989. "Collusion among asymmetric firms: The case of different discount factors," International Journal of Industrial Organization, Elsevier, vol. 7(2), pages 289-307, June.
    8. Spagnolo, Giancarlo, 2006. "Leniency and Whistleblowers in Antitrust," CEPR Discussion Papers 5794, C.E.P.R. Discussion Papers.
    9. Joseph E. Harrington & Myong-Hun Chang, 2009. "Modeling the Birth and Death of Cartels with an Application to Evaluating Competition Policy," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1400-1435, December.
    10. Oindrila De, 2010. "Analysis of Cartel Duration: Evidence from EC Prosecuted Cartels," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(1), pages 33-65.
    11. repec:dgr:kubcen:200574 is not listed on IDEAS
    12. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
    13. Philippe Cyrenne, 1999. "On Antitrust Enforcement and the Deterrence of Collusive Behaviour," Review of Industrial Organization, Springer, vol. 14(3), pages 257-272, May.
    14. Joseph E. Harrington, 2005. "Optimal Cartel Pricing In The Presence Of An Antitrust Authority," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 145-169, 02.
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