Cartel dynamics and Leniency policy: Self-reporting to start over with a clean slate

Adriana Alventosa (), José Manuel Ordóñez-de-Haro () and Javier Rodero Cosano ()
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Adriana Alventosa: ERI-CES, Universitat de València
José Manuel Ordóñez-de-Haro: Departamento de Teoría e Historia Económica. Universidad de Málaga.
Javier Rodero Cosano: Smart Decision Lab, Departamento de Teoría e Historia Económica. Universidad de Málaga.

No 2025-02, Working Papers from Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center

Abstract: This paper develops a dynamic discrete-time model of collusive behaviour in which firms can apply for leniency to reduce fines. We propose a sequential-move game inspired by the centipede game, capturing firms' incentives to be the first to self-report a cartel. The model examines cartel formation, stability, and recidivism, assuming that fines apply to the undiscovered record of collusion, not just current conduct. We find that when collusion is attractive but the leniency programme is not sufficiently generous, firms form a single cartel without self-reporting. However, when collusion is highly attractive and the leniency programme sufficiently generous, it can destabilize cartels but also foster recidivism: firms use leniency to ``clean the slate'' and restart collusion at a lower expected cost. This equilibrium behaviour may help explain the empirically observed prevalence of short-lived cartels and repeat offenders under existing leniency regimes.

Keywords: Antitrust; Cartels; Recidivism; Leniency; Dynamic Games (search for similar items in EconPapers)
JEL-codes: D43 K21 K42 L40 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2025-04
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