Cartel Organization and Antitrust Enforcement

Zhijun Chen

No 08-21, Working Papers from Centre for Competition Policy, University of East Anglia

Abstract: This paper incorporates the economic theory of organizations into the framework of public law enforcement, and characterizes the dual-coalition structure of cartel organization that allows us to highlight the strategic interactions between cartel participants under different antitrust policies. We show that delegation of authorities over collusive decisions from top executives to subordinates can mitigate the temptation of renege on collusive relationships and thus contributes to facilitating collusion. This result parallels the insights in Baker, Gibbons and Murphy (2002, 2006) which find that the optimal allocation of decision rights is to minimize the maximum temptation to renege on relational contracts. Moreover, the efficiency gains of delegation in facilitating collusion can be mitigated when the corporate leniency program is introduced, in particular whenever it is unlikely to detect cartels absent leniency and the corporate liability is muc more significant than individual liability.

Keywords: cartel organization; antitrust enforcement; leniency programs (search for similar items in EconPapers)
JEL-codes: D23 K21 L41 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2008-04
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-law and nep-reg
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Working Paper: Cartel Organization and Antitrust Enforcement (2008)
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