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Corporate Leniency in a Dynamic Context: The Preemptive Push of an Uncertain Future

Dennis Gaertner ()

No 2107, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: This paper investigates how leniency programs can induce collusive offenders to self report in a dynamic setting, where the risk of independent detection evolves stochastically over time. We show how this uncertainty about the future can push firms into preemptive application, and how these preemptive incentives may unravel to the point where firms apply long before the risk of independent detection is in any way imminent. The analysis sheds light on factors and policy instruments which favor such an unraveling effect. These include: little discontinuity in time and state, firms’ patience, and a relatively harsh treatment of firms which fail to preempt others. In contrast, the described effects do not necessarily require a very high absolute level of leniency reduction, or even rewards.

Keywords: cartel; collusion; leniency program; preemption; dynamics (search for similar items in EconPapers)
JEL-codes: D43 D84 K21 K42 L41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2021-06
New Economics Papers: this item is included in nep-com, nep-ind and nep-law
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