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The Effectiveness of Leniency Programs when Firms choose the Degree of Collusion

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  • Winand Emons

Abstract

An antitrust authority deters collusion using fines and a leniency program. It chooses the probability of an investigation. Firms pick the degree of collusion: The more they collude, the higher are profits, but so is the probability of detection. Firms thus trade-o higher profits against higher expected fines. If firms are suciently patient, leniency is ine ective; it may even increase collusion. Increasing the probability of an investigation at low levels does not increase deterrence. Increasing the probability of an investigation at high levels reduces collusion, yet never completely.

Suggested Citation

  • Winand Emons, 2018. "The Effectiveness of Leniency Programs when Firms choose the Degree of Collusion," Diskussionsschriften dp1816, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp1816
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    References listed on IDEAS

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    Cited by:

    1. Andres, Maximilian & Bruttel, Lisa & Friedrichsen, Jana, 2021. "The leniency rule revisited: Experiments on cartel formation with open communication," International Journal of Industrial Organization, Elsevier, vol. 76(C).
    2. Jeroen Hinloopen & Sander Onderstal & Adriaan Soetevent, 2023. "Corporate Leniency Programs for Antitrust: Past, Present, and Future," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(2), pages 111-122, September.
    3. Isogai, Shigeki & Shen, Chaohai, 2023. "Multiproduct firm’s reputation and leniency program in multimarket collusion," Economic Modelling, Elsevier, vol. 125(C).
    4. Charistos, Konstantinos & Papadopoulos, Konstantinos G., 2022. "Cartel reporting under passive common ownership," Economics Letters, Elsevier, vol. 216(C).
    5. Lenhard, Severin, 2024. "Cartel Stability in Times of Low Interest Rates," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302361, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    antitrust; cartels; deterrence; leniency;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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