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The Effectiveness of Leniency Programs when Firms choose the Degree of Collusion

Winand Emons ()

No 13262, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: An antitrust authority deters collusion using fines and a leniency program. It chooses the probability of an investigation. Firms pick the degree of collusion: The more they collude, the higher are profits, but so is the probability of detection. Firms thus trade-off higher profits against higher expected fines. If firms are sufficiently patient, leniency is ineffective; it may even increase collusion. Increasing the probability of an investigation at low levels does not increase deterrence. Increasing the probability of an investigation at high levels reduces collusion, yet never completely.

Keywords: Antitrust; cartels; deterrence; Leniency (search for similar items in EconPapers)
JEL-codes: D43 K21 K42 L40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-law and nep-mic
Date: 2018-10
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