Leniency and Cartel Size: A Note on How Self-Reporting Nurtures Collusion in Concentrated Markets

Abstract

Leniency programs lower the expected cost of anticompetitive behavior to the extent that they allow colluding firms to pay reduced fines. This paper connects this potential adverse effect to the number of firms involved in the cartel agreement. It is shown that leniency programs may provide firms with an incentive to form cartels of limited size in concentrated markets.

Keywords: Leniency programs, Cartels, Self-reporting, Collusion

JEL Classification: D43, L13, L41, L44