The Effects of Leniency on Maximal Cartel Pricing

H.E.D. Houba, E. Motchenkova, Q. Wen

Research output: Working paperDiscussion paperOther research output

Abstract

We analyze maximal cartel prices in infnitely-repeated oligopoly models under leniency where fines are linked to illegal gains, as often outlined in existing antitrust regulation, and detection probabilities depend on the degree of collusion. We introduce cartel culture that describes how likely cartels persist after each conviction. Our analysis disentangles the effects of traditional antitrust regulation, leniency, and cartel strategies. Without rewards to the strictly-first reporter, leniency cannot reduce maximal cartel prices below those under traditional regulation. Moreover, in order to avoid adverse effects fine reductions should be moderate in case of multiple reporters. Our results extend the current literature and partially support existing leniency programs.
Original languageEnglish
Place of PublicationTilburg
PublisherTILEC
Number of pages38
Volume2009-038
Publication statusPublished - 2009

Publication series

NameTILEC Discussion Paper
Volume2009-038

Fingerprint

Cartel
Leniency
Pricing
Cartels
Reward
Leniency programs
Collusion
Oligopoly

Keywords

  • Cartel
  • Antitrust
  • Competition Policy
  • Leniency Program
  • Self-reporting
  • Repeated Game

Cite this

Houba, H. E. D., Motchenkova, E., & Wen, Q. (2009). The Effects of Leniency on Maximal Cartel Pricing. (TILEC Discussion Paper; Vol. 2009-038). Tilburg: TILEC.
Houba, H.E.D. ; Motchenkova, E. ; Wen, Q. / The Effects of Leniency on Maximal Cartel Pricing. Tilburg : TILEC, 2009. (TILEC Discussion Paper).
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Houba, HED, Motchenkova, E & Wen, Q 2009 'The Effects of Leniency on Maximal Cartel Pricing' TILEC Discussion Paper, vol. 2009-038, TILEC, Tilburg.

The Effects of Leniency on Maximal Cartel Pricing. / Houba, H.E.D.; Motchenkova, E.; Wen, Q.

Tilburg : TILEC, 2009. (TILEC Discussion Paper; Vol. 2009-038).

Research output: Working paperDiscussion paperOther research output

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Houba HED, Motchenkova E, Wen Q. The Effects of Leniency on Maximal Cartel Pricing. Tilburg: TILEC. 2009. (TILEC Discussion Paper).