Self-Defeating Antitrust Laws: How Leniency Programs Solve Bertrand's Paradox and Enforce Collusion in Auctions
38 Pages Posted: 7 Nov 2000
Date Written: June 14, 2000
I find that current US's and EU's Antitrust laws -- in particular their "moderate" leniency programmes that only reduce or at best cancel sanctions for price-fixing firms that self-report -- may make collusion enforceable even in one-shot competitive interactions, like Bertrand oligopolies and first-price auctions, where no collusion would be supportable otherwise. The reduced sanctions for firms that self-report provide the otherwise missing credible threat necessary to discipline collusive agreements: they ensure that if a firm unilaterally deviates from collusive strategies, other firms find it convenient to punish it by reporting information to the Antitrust Authority.
Keywords: Antitrust law, leniency, self-reporting, cartels, collusion, bid-rigging, oligopoly, auctions
JEL Classification: D43, D44, K21, L41
Suggested Citation: Suggested Citation