Tuesday, March 17, 2009
Posted by D. Daniel Sokol
Jesko Herre, University of Cologne - Economics and Alexander Rasch, University of Cologne - Economics have an interesting account of The Deterrence Effect of Excluding Ringleaders from Leniency Programs.
ABSTRACT: This paper looks at the implications of excluding ringleaders from leniency programs for the sustainability of collusion. We find that excluding ringleaders decreases the sustainability of collusion by forgoing the information an additional potential whistleblower means for the antitrust authority. On the other hand, a ringleader will ask for a compensation for not being able to apply for leniency. Such a compensation, however, results in an asymmetry between the ringleader and the other cartel members which may destabilize collusion. We show that if an antitrust authority investigates an industry only with a low probability, excluding ringleaders from leniency programs increases the sustainability of collusion. If the probability of review is high, an exclusion may decrease the sustainability.