Business Economics and Public Policy Papers

Document Type

Journal Article

Date of this Version

2007

Publication Source

Contribution to Economic Analysis

Volume

282

Start Page

59

Last Page

80

DOI

10.1016/S0573-8555(06)82003-1

Abstract

Previous research exploring the effect of corporate leniency programs has modeled 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.

Copyright/Permission Statement

© 2007. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Comments

At the time of publication, author Joseph E. Harrington Jr. was affiliated with the John Hopkins University. Currently, he is a faculty member in the Business, Economics and Public Policy Department of the Wharton School at the University of Pennsylvania.

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Date Posted: 27 November 2017

This document has been peer reviewed.