Effects of Leniency Programs on Cartel Stability

CentER Discussion Paper No. 2004-98

32 Pages Posted: 12 Nov 2004

See all articles by Evgenia Motchenkova

Evgenia Motchenkova

VU University Amsterdam - Department of Economics; TILEC

Date Written: September 2004

Abstract

This paper studies the effect of leniency programs on the stability of cartels under two different regimes of fines, fixed and proportional. We analyze the design of self-reporting incentives, having a group of defendants. Moreover, we consider a dynamic setup, where accumulated (not instantaneous) benefits and losses from crime are taken into account. We obtain that cartel occurrence is less likely if the rules of the leniency programs are more strict and the procedure of application for leniency is more confidential. Moreover, we conclude that, when the procedure of application for leniency is not confidential and penalties and rate of law enforcement are low, leniency may increase duration of cartel agreements. Surprisingly, under a fixed penalty scheme, the introduction of a leniency program cannot improve the effectiveness of antitrust enforcement when the procedure of application for leniency is not confidential.

Keywords: Antitrust, law, policy

JEL Classification: K21, L41

Suggested Citation

Motchenkova, Evgenia, Effects of Leniency Programs on Cartel Stability (September 2004). CentER Discussion Paper No. 2004-98. Available at SSRN: https://ssrn.com/abstract=617224 or http://dx.doi.org/10.2139/ssrn.617224

Evgenia Motchenkova (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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