fines, leniency, and rewards in antitrust

Abstract

This paper reports results from an experiment studying how …nes, leniency and rewards for whistleblowers a¤ect cartel formation and prices. Antitrust without leniency reduces cartel formation but increases cartel prices: subjects use costly …nes as punishments. Leniency improves antitrust by strengthening deterrence but stabilizes surviving cartels: subjects appear to anticipate the lower post-conviction prices after reports/leniency. With rewards, prices fall at the competitive level.Overall our results suggest a strong cartel deterrence potential for well-run leniency and reward schemes. These …ndings may also be relevant for similar white-collar organized crimes, like corruption and fraud.JEL codes: C73, C92 and L41

Do buyer groups facilitate collusion?

“…Hence, a second subgame perfect Nash equilibrium outcome (in weakly dominated strategies) involves n − 3 or fewer firms joining the group. 4 This holds for both the open and the closed buyer group. In the 3 The motivation for this setup is that buyer groups must have a minimum size to be able to procure cheaper than single firms.…”

“…By backward induction, we solve for the quantity-setting stage first. If all firms are in the buyer group, they have low costs (c 1 = c 2 = ... = c n = c) and thus they produce q N = a − c n + 1 (4) in equilibrium. If no buyer group is established, all firms have high costs (c 1 = c 2 = ... = c n = c) and we obtain…”

Letting the briber go free: An experiment on mitigating harassment bribes

“…Not surprisingly, reporting becomes less attractive as the citizen assesses higher threats of retaliation. 15 …”

Whistleblowing: Incentives and Situational Determinants

“…In the repeated game conducted by Bigoni et al (2012), however, leniency resulted in fewer cartels, while the prices of surviving cartels grew compared to traditional antitrust law. Adding a reward for the reporting cartel member lowered the deterrence of cartel 8 formation in comparison to leniency, but let to very high reporting rates, thus destabilizing cartels and leading to lower prices.…”

“…the reduction of fines in case of reporting a cartel, in antitrust law. Two well-known studies, Apesteguia et al (2007) and Bigoni et al (2012), investigate whether such leniency programs thwart cartels and promote competition as intended or, to the contrary, stabilize cartels because whistleblowing can be used to punish defecting cartel members.…”