The Leniency Rule Revisited: Experiments on Cartel Formation with Open Communication

64 Pages Posted: 19 Jan 2021

See all articles by Maximilian Andres

Maximilian Andres

University of Potsdam

Lisa Bruttel

Humboldt University of Berlin

Jana Friedrichsen

Humboldt University of Berlin - Faculty of Economics; WZB Berlin Social Science Center; German Institute for Economic Research (DIW Berlin)

Date Written: January 2021

Abstract

The experimental literature on antitrust enforcement provides robust evidence that communication plays an important role for the formation and stability of cartels. We extend these studies through a design that distinguishes between innocuous communication and communication about a cartel, sanctioning only the latter. To this aim, we introduce a participant in the role of the competition authority, who is properly incentivized to judge communication content and price setting behavior of the firms. Using this novel design, we revisit the question whether a leniency rule successfully destabilizes cartels. In contrast to existing experimental studies, we find that a leniency rule does not affect cartelization. We discuss potential explanations for this contrasting result.

Keywords: Cartel, judgment of communication, corporate leniency program, price competition, experiment

JEL Classification: C92,D43,L41

Suggested Citation

Andres, Maximilian and Bruttel, Lisa and Friedrichsen, Jana, The Leniency Rule Revisited: Experiments on Cartel Formation with Open Communication (January 2021). DIW Berlin Discussion Paper No. 1926, Available at SSRN: https://ssrn.com/abstract=3769348 or http://dx.doi.org/10.2139/ssrn.3769348

Maximilian Andres

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany

Lisa Bruttel

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, AK Berlin 10099
Germany

Jana Friedrichsen (Contact Author)

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

WZB Berlin Social Science Center ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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