Do Leniency Policies Facilitate Collusion? Experimental Evidence

36 Pages Posted: 24 Oct 2013 Last revised: 15 May 2015

Georg Clemens

Compass Lexecon

Holger Andreas Rau

University of Göttingen

Date Written: May 2015

Abstract

This paper analyzes non-discriminatory and discriminatory leniency policies in a multi-stage cartel formation experiment where multiple ringleaders may emerge. Ringleaders often take a leading role in the coordination and formation of a cartel. A leniency policy which grants amnesty to all "whistleblowers" except for ringleaders may reduce the incentive to become a ringleader and thus disrupt cartel formation. Although theory predicts that cartels will always be reported, whistleblowing rarely occurs. Paradoxically we find that the discriminatory leniency policy induces more firms to become ringleaders, which ultimately facilitates coordination in the cartel.

Keywords: Cartels, Experiment, Leniency Programs, Ringleader Discrimination

JEL Classification: C92, K21, L41

Suggested Citation

Clemens, Georg and Rau, Holger Andreas, Do Leniency Policies Facilitate Collusion? Experimental Evidence (May 2015). Available at SSRN: https://ssrn.com/abstract=2343915 or http://dx.doi.org/10.2139/ssrn.2343915

Georg Clemens

Compass Lexecon ( email )

23 Square de Meeûs
Brussels, 1000
Belgium

Holger Andreas Rau (Contact Author)

University of Göttingen ( email )

Platz der Göttinger Sieben 3
Göttingen, Niedersachsen 37073
Germany

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