 Multiproduct firm’s reputation and leniency program in multimarket collusionShigeki Isogai and Chaohai Shen Economic Modelling, 2023, vol. 125, issue C Abstract: The corporate leniency program is believed to be useful for antitrust authorities. Our study challenges this belief in a setting where a large multiproduct firm meets single-product firms in independent and isolated markets. We explore an adversary effect of the corporate leniency program in multimarket collusion in a reputation model. A multiproduct firm forming cartels in multiple markets can build its reputation as a tough firm that punishes any deviation by applying for leniency. We show that the multiproduct firm can manipulate the leniency program to stabilize cartels in markets without material linkages (such as demand linkages). This effect does not exist if only one market exists or the leniency-application outcome is not publicly observable. Our findings theoretically explain why the numerous leniency applications by multiproduct firms should concern antitrust agencies and imply several directions for revising the leniency policy. Keywords: Leniency program; Multimarket collusion; Reputation; Multiproduct firm; Recidivism (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:125:y:2023:i:c:s0264999323001608 DOI: 10.1016/j.econmod.2023.106348 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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