Coordination Problem for Leniency Programs against International Cartels (Japanese)

Hiroo Iwanari, Toshiji Kawagoe, Yuji Kimura, Taisuke Matsubae and Hirokazu Takizawa

Discussion Papers (Japanese) from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Theoretical research on leniency programs has thus far focused on cartels formed within a country. The purpose of this paper, in contrast, is to analyze the situation where a cartel is formed internationally. We consider a model with two oligopolistic firms operating in two countries. The antitrust authority in each country chooses either to implement a leniency program or use traditional, probabilistic investigation to detect and/or deter cartel activity. Given the combination of antitrust policies in both countries, the two firms simultaneously play market games. Assuming a situation in which information on a cartel activity spills over to the other, we analyze strategic interdependency faced by the antitrust authorities. Several possible policy objectives of the antitrust authority are considered. We find that if the objective is to maximize revenues from the penalty imposed on cartels, there exists an asymmetric equilibrium in which one country chooses to free-ride the other's choosing a leniency program.

Pages: 13 pages
Date: 2006-03
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Persistent link: https://EconPapers.repec.org/RePEc:eti:rdpsjp:06014

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