Divide Et Impera: Optimal Leniency Programs

48 Pages Posted: 3 May 2005

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Date Written: December 2004

Abstract

Leniency programs (or policies) reduce sanctions against cartel members that self-report to the Antitrust Authority. We focus on their ability to directly deter cartels and analogous criminal organizations by undermining internal trust, increasing individual incentives to 'cheat' on partners. Optimally designed 'courageous' leniency programs reward the first party that reports sufficient information with the fines paid by all other parties, and with finitely high fines achieve the first best. 'Moderate' leniency programs that only reduce or cancel sanctions, as implemented in reality, may also destabilize and deter cartels by (a) protecting agents that defect (and report) from fines; (b) protecting them from other agents' punishment; and (c) increasing the riskiness of taking part to a cartel.

Keywords: Amnesty, antitrust, cartels, collusion, corruption, competition policy, immunity, law enforcement, leniency, oligopoly, organized crime, repeated games, risky cooperation, whistleblowers

JEL Classification: L13, L44

Suggested Citation

Spagnolo, Giancarlo, Divide Et Impera: Optimal Leniency Programs (December 2004). CEPR Discussion Paper No. 4840. Available at SSRN: https://ssrn.com/abstract=716143

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

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