CIRJE-F-358 | "The Impact of the Corporate Leniency Program on Cartel Formation and the Cartel Price Path" |
Author Name | Chen, Joe and Joseph E. Harrington, Jr. |
Date | August 2005 |
Full Paper | PDF file@ |
Remarks | Subsequently published in The Political Economy of Antitrust, pp59-80, 2007. |
Abstract |
Previous research exploring the effect of corporate leniency programs has modelled the oligopoly stage game as a Prisoners' Dilemma. Using numerical analysis, we consider the Bertrand price game and allow the probability of detection and penalties to be sensitive to firms' prices. Consistent with earlier results, a maximal leniency program necessarily makes collusion more difficult. However, we also find that partial leniency programs - such as in the U.S. - can make collusion easier compared to offering no leniency. We also show that even if cartel formation is not deterred, a leniency program can reduce the prices charged by firms. |