Effects of Leniency Programs on Cartel Stability

Abstract

This paper studies the effect of leniency programs on the stability of cartels under two different regimes of fines, fixed and proportional. We analyze the design of self-reporting incentives, having a group of defendants. Moreover, we consider a dynamic setup, where accumulated (not instantaneous) benefits and losses from crime are taken into account. We obtain that cartel occurrence is less likely if the rules of the leniency programs are more strict and the procedure of application for leniency is more confidential. Moreover, we conclude that, when the procedure of application for leniency is not confidential and penalties and rate of law enforcement are low, leniency may increase duration of cartel agreements. Surprisingly, under a fixed penalty scheme, the introduction of a leniency program cannot improve the effectiveness of antitrust enforcement when the procedure of application for leniency is not confidential.

Keywords: Antitrust, law, policy

JEL Classification: K21, L41