Maximal Cartel Pricing and Leniency Programs

TILEC Discussion Paper No. 2008-046

Tinbergen Institute Discussion Paper No. 08-120/1

38 Pages Posted: 18 Dec 2008  

Harold Houba

VU University Amsterdam - Department of Econometrics; Tinbergen Institute

Evgenia Motchenkova

VU University Amsterdam - Department of Economics; TILEC

Quan Wen

Vanderbilt University - College of Arts and Science - Department of Economics

Date Written: December 2008

Abstract

For a general class of oligopoly models with price competition, we analyze the impact of ex-ante leniency programs in antitrust regulation on the endogenous maximal-sustainable cartel price. This impact depends upon industry characteristics including its cartel culture. Our analysis disentangles the effects of traditional antitrust regulation and the leniency program. Ex-ante leniency programs are effective if and only if these offer substantial rewards to the self-reporting firm. This is in contrast to currently employed programs that are therefore ineffective.

Keywords: Cartel, Antitrust Policy, Antitrust Law, Leniency Program, Self-reporting, re-peated game

JEL Classification: L41, K21, C72

Suggested Citation

Houba, Harold and Motchenkova, Evgenia and Wen, Quan, Maximal Cartel Pricing and Leniency Programs (December 2008). Tinbergen Institute Discussion Paper No. 08-120/1; Tinbergen Institute Discussion Paper No. 08-120/1. Available at SSRN: https://ssrn.com/abstract=1317635 or http://dx.doi.org/10.2139/ssrn.1317635

Harold E. D. Houba

VU University Amsterdam - Department of Econometrics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

HOME PAGE: http://staff.feweb.vu.nl/hhouba/

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

HOME PAGE: http://staff.feweb.vu.nl/hhouba/

Evgenia Motchenkova (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Quan Wen

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235-1819
United States
615-322-0174 (Phone)
615-343-8495 (Fax)

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