Thursday, September 9, 2010
Posted by D. Daniel Sokol
Nahom Ghebrihiwet and Evgenia Motchenkova, VU University Amsterdam - Department of Economics, TILEC
discuss Leniency Programs in the Presence of Judicial Errors.
ABSTRACT: We analyze the effects of antitrust and leniency programs in a repeated oligopoly model outlined in Motta and Polo (2003). We extend their framework by including the possibility of Type I judicial errors and pre-trial settlements. Through comparison of our results to the earlier results we come to a number of novel conclusions. Firstly, antitrust enforcement in the presence of judicial errors is less effective and ex-ante deterrence is weaker than was predicted by Motta and Polo (2003). Secondly, adverse effects of leniency programs are underestimated by the traditional approach, which does not take Type I judicial errors into account.