Do Leniency Policies Facilitate Collusion? Experimental Evidence
36 Pages Posted: 24 Oct 2013 Last revised: 15 May 2015
Date Written: May 2015
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: Suggested Citation