From Overt to Tacit Collusion: Experimental Evidence on the Adverse Effects of Corporate Leniency Programs

Tinbergen Institute Discussion Paper No. TI 2008-059/1

20 Pages Posted: 16 Jun 2008  

Jeroen Hinloopen

CPB Netherlands Bureau of Economic Policy Analysis; University of Amsterdam - Amsterdam School of Economics (ASE); Tinbergen Institute

Adriaan R. Soetevent

University of Groningen; Tinbergen Institute

Date Written: May 2008

Abstract

Recent laboratory experiments support the popular view that the introduction of corporate leniency programs has significantly decreased cartel activity. The design of these repeated game experiments however is such that engaging in illegal price discussions is the only way for subjects to avoid the one-shot competitive equilibrium. Subjects in the experiment of this paper have multiple feasible Nash equilibrium strategies to avoid the competitive equilibrium. These strategies differ in the difficulty of the coordination problem they have to solve. The experimental results show that if the efforts of the antitrust authority and the leniency program are directed exclusively to the most straightforward collusive scheme, subjects manage to switch to a more intricate form of coordination. This shift from overt collusion to tacit collusion questions the acclaimed success of corporate leniency programs.

Keywords: overt collusion, tacit collusion, corporate leniency program, antitrust policy

JEL Classification: C72, C92, L41

Suggested Citation

Hinloopen, Jeroen and Soetevent, Adriaan R., From Overt to Tacit Collusion: Experimental Evidence on the Adverse Effects of Corporate Leniency Programs (May 2008). Available at SSRN: https://ssrn.com/abstract=1146347 or http://dx.doi.org/10.2139/ssrn.1146347

Jeroen Hinloopen (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Adriaan R. Soetevent

University of Groningen ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
++ 31 50 363 7018 (Phone)

HOME PAGE: http://www.soetevent.com

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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