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Prosecution and Leniency Programs: The Role of Bluffing in Opening Investigations

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  • Julien Sauvagnat

Abstract

type="main"> This paper characterizes the optimal investigation and leniency policies when the Competition Authority is privately informed about the strength of a cartel case. I show that the Competition Authority can then exploit firms’ uncertainty about the risk of conviction to obtain confessions even when the case is weak. More generally, I show that offering full leniency allows the Competition Authority to open more successful investigations (what I refer to as the ‘activism effect’ of leniency), which overall raises both cartel desistance and cartel deterrence. Finally, I discuss the policy implications of the model.

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  • 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.
    • Handle: RePEc:bla:jindec:v:63:y:2015:i:2:p:313-338
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    Cited by:

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    2. Emilie Dargaud & Armel Jacques, 2015. "Endogenous firms’ organization, internal audit and leniency programs," Working Papers 1524, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Marc Blatter & Winand Emons & Silvio Sticher, 2018. "Optimal Leniency Programs When Firms Have Cumulative and Asymmetric Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(3), pages 403-427, May.
    4. Karine Brisset & Francois Cochard & Eve-Angeline Lambert, 2023. "Is Amnesty Plus More Successful in Fighting Multimarket Cartels? An Exploratory Analysis," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(2), pages 211-237, September.
    5. Gamba, Astrid & Immordino, Giovanni & Piccolo, Salvatore, 2018. "Corruption, organized crime and the bright side of subversion of law," Journal of Public Economics, Elsevier, vol. 159(C), pages 79-88.
    6. Giovanni Immordino & Salvatore Piccolo & Paolo Roberti, 2018. "Criminal Networks, Market Externalities and Optimal Leniency," CSEF Working Papers 519, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    7. Joseph E. Harrington Jr. & Myong-Hun Chang, 2015. "When Can We Expect a Corporate Leniency Program to Result in Fewer Cartels?," Journal of Law and Economics, University of Chicago Press, vol. 58(2), pages 417-449.
    8. Giovanni Immordino & Salvatore Piccolo & Paolo Roberti, 2018. "Optimal Leniency and the Organization Design of Group Delinquency," CSEF Working Papers 503, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    9. Giovanni Immordino & Salvatore Piccolo & Paolo Roberti, 2024. "Criminal network, leniency, and market externalities," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(4), August.
    10. Bin He & Mengzhen Qi & Ning Wang & Zhenhua Zhang, 2022. "Avoiding Real Harm but False Good: The Influence Mechanism of Political Relations on the Effectiveness of Environmental Regulation Policies," IJERPH, MDPI, vol. 19(23), pages 1-16, November.
    11. Immordino, Giovanni & Piccolo, Salvatore & Roberti, Paolo, 2020. "Optimal leniency and the organization design of group crime," Journal of Public Economics, Elsevier, vol. 191(C).

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