Self-Defeating Antitrust Laws: How Leniency Programs Solve Bertrand's Paradox and Enforce Collusion in Auctions

38 Pages Posted: 7 Nov 2000

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Date Written: June 14, 2000

Abstract

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

Spagnolo, Giancarlo, Self-Defeating Antitrust Laws: How Leniency Programs Solve Bertrand's Paradox and Enforce Collusion in Auctions (June 14, 2000). FEEM Working Paper No. 52.2000. Available at SSRN: https://ssrn.com/abstract=236400 or http://dx.doi.org/10.2139/ssrn.236400

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

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