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Do Leniency Policies facilitate Collusion? Experimental Evidence

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  • Rau, Holger
  • Clemens, Georg

Abstract

This paper experimentally analyzes the cartel coordination challenge induced by the discrimination of cartel ringleaders in leniency policies. Ringleaders often take a leading role in the coordination and formation of a cartel. A leniency policy which grants amnesty to all "whistleblowers" except for ringleaders may therefore reduce the incentive to become a ringleader and may disrupt cartel formation. We analyze discriminatory and non-discriminatory leniency policies in a multi-stage cartel formation experiment where multiple ringleaders may emerge. Although theory predicts that cartels will always be reported, whistleblowing rarely occurs. Paradoxically the discriminatory leniency policy induces more firms to become ringleaders, which ultimately facilitates coordination in the cartel.

Suggested Citation

  • Rau, Holger & Clemens, Georg, 2014. "Do Leniency Policies facilitate Collusion? Experimental Evidence," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100509, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc14:100509
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    References listed on IDEAS

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    Cited by:

    1. Carsten J. Crede & Liang Lu, 2016. "The effects of endogenous enforcement on strategic uncertainty and cartel deterrence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 16-08, School of Economics, University of East Anglia, Norwich, UK..
    2. Gomez-Martinez, Francisco, 2016. "Partial Cartels and Mergers with Heterogeneous Firms: Experimental Evidence," MPRA Paper 81132, University Library of Munich, Germany, revised 01 Jul 2017.
    3. Odenkirchen, Johannes, 2017. "Pricing Behavior of Cartel Outsiders in Incomplete Cartels," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168309, Verein für Socialpolitik / German Economic Association.
    4. Gomez-Martinez, Francisco, 2017. "Partial Cartels and Mergers with Heterogenous Firms: Experimental Evidence," EconStor Preprints 169380, ZBW - German National Library of Economics.

    More about this item

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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