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Do Leniency Policies facilitate Collusion? Experimental Evidence

Holger Rau and Georg Clemens

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper experimentally analyzes the cartel coordination challenge induced by the discrimination of cartel ringleaders in leniency policies. Ringleaders often take a leading role in the coordination and formation of a cartel. A leniency policy which grants amnesty to all "whistleblowers" except for ringleaders may therefore reduce the incentive to become a ringleader and may disrupt cartel formation. We analyze discriminatory and non-discriminatory leniency policies in a multi-stage cartel formation experiment where multiple ringleaders may emerge. Although theory predicts that cartels will always be reported, whistleblowing rarely occurs. Paradoxically the discriminatory leniency policy induces more firms to become ringleaders, which ultimately facilitates coordination in the cartel.

JEL-codes: C92 K21 L41 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-com, nep-exp, nep-ind and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100509

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