Optimal Leniency Programs
FEEM Working Paper No. 42.2000
30 Pages Posted: 14 Aug 2000
Date Written: May 13, 2000
Leniency programs reduce sanctions for law violators that self-report. I focus on their ability to deter price-fixing cartels - and organized crime in general - by increasing incentives to "cheat" on partners. Moderate leniency programs that reduce/cancel sanctions for a spontaneously reporting party - as those normally implemented in reality - cannot affect cartels and other organized crime. Courageous leniency programs that reward spontaneously self-reporting parties may instead completely and costlessly deter them. When fines/rewards are pure transfers, optimal leniency programs maximize rewards for self-reporting. When financing rewards is costly, optimal leniency programs are restricted to the first reporting party and make this residual claimant for the fines paid by the others.
Keywords: Antitrust law and policy; Self-reporting; Cartels; Collusion; Crime deterrence; Organized crime; Law enforcement
JEL Classification: K42, K21
Suggested Citation: Suggested Citation