The effect of leniency programs on endogenous collusion

Sangwon Park

Economics Letters, 2014, vol. 122, issue 2, 326-330

Abstract: The objective of a leniency program is to reduce sanctions against collusion if a participant voluntarily confesses his behavior or cooperates with the public authority’s investigation. Constructing a model in which the detection probability varies over time, Harrington (2008) pointed out that there are three channels through which the leniency program can affect the collusion amount; furthermore, he presented a sufficient condition under which the maximum leniency is optimal. After extending the model by endogenizing the degree of collusion as well as equilibrium selection in the self-reporting stage, we revealed that the Race to the Courthouse effect disappears and that the maximum reduction is always optimal.

Keywords: Collusion; Antitrust; Leniency program; Self-reporting (search for similar items in EconPapers)
JEL-codes: D43 K21 L41 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:122:y:2014:i:2:p:326-330

DOI: 10.1016/j.econlet.2013.12.014

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