Wednesday, July 1, 2009
Posted by D. Daniel Sokol
A new article in this month's American Economics Review worth reading is Nathan H. Miller (DOJ), Strategic Leniency and Cartel Enforcement. Ken Heyer, this was a good hire for DOJ - kudos to you and your interview team.
What remains un-answered for me is whether there are any studies that show the impact of leniency on cartel formation. Email me if I have missed something in the literature.
ABSTRACT: The cornerstone of cartel enforcement in the United States and elsewhere is a commitment to the lenient prosecution of early confessors. A burgeoning game theoretical literature is ambiguous regarding the impacts of leniency. I develop a theoretical model of cartel behavior that provides empirical predictions and moment conditions, and apply the model to the complete set of indictments and information reports issued over a 20-year span. Statistical tests are consistent with the notion that leniency enhances deterrence and detection capabilities. The results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime.