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Prosecution and Leniency Programs: a Fool's Game

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  • Sauvagnat, Julien

Abstract

We present a model where the Antitrust Authority is privately informed about the strength of the case against a given cartel. In this context, the Antitrust Authority may obtain cartel members' confessions even when it opens an investigation knowing that it has no chance to find hard evidence. More generally, we show that offering leniency allows to raise the conviction rate, which in turn enhances cartel desistance and cartel deterrence. A second contribution of the paper is to show that the optimal leniency scheme involves a single informant rule. That is, amnesty should be given only if a unique cartel member reports information.

Suggested Citation

  • Sauvagnat, Julien, 2010. "Prosecution and Leniency Programs: a Fool's Game," TSE Working Papers 10-188, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:23201
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    References listed on IDEAS

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    1. 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.
    2. Jose Apesteguia & Martin Dufwenberg & Reinhard Selten, 2007. "Blowing the Whistle," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(1), pages 143-166, April.
    3. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    4. repec:dau:papers:123456789/13637 is not listed on IDEAS
    5. 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.
    6. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    7. Zhijun Chen & Patrick Rey, 2013. "On the Design of Leniency Programs," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 917-957.
    8. Brenner, Steffen, 2009. "An empirical study of the European corporate leniency program," International Journal of Industrial Organization, Elsevier, vol. 27(6), pages 639-645, November.
    9. Bigoni, Maria & Fridolfsson, Sven-Olof & Le Coq, Chloe & Spagnolo, Giancarlo, 2008. "Fines, Leniency, Rewards and Organized Crime: Evidence from Antitrust Experiments," SSE/EFI Working Paper Series in Economics and Finance 698, Stockholm School of Economics.
    10. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
    11. Nathan H. Miller, 2009. "Strategic Leniency and Cartel Enforcement," American Economic Review, American Economic Association, vol. 99(3), pages 750-768, June.
    12. Frezal, Sylvestre, 2006. "On optimal cartel deterrence policies," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1231-1240, November.
    13. Jeroen Hinloopen & Adriaan R. Soetevent, 2008. "Laboratory evidence on the effectiveness of corporate leniency programs," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 607-616.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Julien Sauvagnat, 2015. "Prosecution and Leniency Programs: The Role of Bluffing in Opening Investigations," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 313-338, June.
    2. Zhijun Chen & Patrick Rey, 2013. "On the Design of Leniency Programs," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 917-957.
    3. Blatter, Marc & Emons, Winand & Sticher, Silvio, 2014. "Optimal Leniency Programs when Firms Have Cumulative and Asymmetric Evidence," CEPR Discussion Papers 10106, C.E.P.R. Discussion Papers.
    4. Emilie Dargaud & Armel Jacques, 2015. "Endogenous firms' organization, internal audit and leniency programs," Working Papers halshs-01199268, HAL.
    5. Tim Reuter, 2012. "Private antitrust enforcement revisited: The role of private incentives to report evidence to the antitrust authority," Working Paper Series of the Department of Economics, University of Konstanz 2012-04, Department of Economics, University of Konstanz.
    6. Joseph E. Harrington, 2012. "Corporate Leniency with Private Information: An Exploratory Example," Chapters,in: Recent Advances in the Analysis of Competition Policy and Regulation, chapter 2 Edward Elgar Publishing.
    7. Salvatore Piccolo & Giovanni Immordino, 2012. "Optimal Accomplice-Witnesses Regulation under Asymmetric Information," CSEF Working Papers 304, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    8. Sauvagnat, Julien, 2014. "Are leniency programs too generous?," Economics Letters, Elsevier, vol. 123(3), pages 323-326.

    More about this item

    Keywords

    Antitrust law and policy; Cartels; Collusion; Self-reporting;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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