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Corporate Leniency in a Dynamic Context: The Preemptive Push of an Uncertain Future

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  • Gaertner, Dennis

Abstract

This paper investigates how leniency programs can induce collusive offenders to self report in a dynamic setting, where the risk of independent detection evolves stochastically over time. We show how this uncertainty about the future can push firms into preemptive application, and how these preemptive incentives may unravel to the point where firms apply long before the risk of independent detection is in any way imminent. The analysis sheds light on factors and policy instruments which favor such an unraveling effect. These include: little discontinuity in time and state, firms’ patience, and a relatively harsh treatment of firms which fail to preempt others. In contrast, the described effects do not necessarily require a very high absolute level of leniency reduction, or even rewards.

Suggested Citation

  • Gaertner, Dennis, 2021. "Corporate Leniency in a Dynamic Context: The Preemptive Push of an Uncertain Future," Economics Working Paper Series 2107, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2021:07
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    More about this item

    Keywords

    cartel; collusion; leniency program; preemption; dynamics;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • 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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