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Evaluating Leniency with Missing Information on Undetected Cartels: Exploring Time-Varying Policy Impacts on Cartel Duration

55 Pages Posted: 31 Mar 2011 Last revised: 22 Nov 2016

Jun Zhou

Department of Economics, Bar-Ilan University; Tilburg Law and Economics Center (TILEC)

Multiple version iconThere are 3 versions of this paper

Date Written: April 1, 2013

Abstract

This paper examines the effects of European Commission's (EC) new leniency program on the EC's capabilities in detecting and deterring cartels. As a supplementary analysis, the US leniency is studied. I discuss a dynamic model of cartel formation and dissolution to illustrate how changes in antitrust policies and economic conditions might affect cartel duration. Comparative statics results are then corroborated with empirical estimates of hazard functions adjusted to account for both the heterogeneity of cartels and the time-varying policy impacts suggested by theory. Contrary to earlier studies, my statistical tests are consistent with the theoretic predictions that following an efficacious leniency program, the average duration of discovered cartels rises in the short run and falls in the long run. The results shed light on the design of enforcement programs against cartels and other forms of conspiracy.

Keywords: evaluation of antitrust policies, time-varying policy effects, sample selection bias, leniency, semi-parametric estimation

JEL Classification: D43, K21, K42, L13

Suggested Citation

Zhou, Jun, Evaluating Leniency with Missing Information on Undetected Cartels: Exploring Time-Varying Policy Impacts on Cartel Duration (April 1, 2013). Available at SSRN: https://ssrn.com/abstract=1798424 or http://dx.doi.org/10.2139/ssrn.1798424

Jun Zhou (Contact Author)

Department of Economics, Bar-Ilan University ( email )

Ramat Gan
Ramat Gan, 52900
Israel

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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