Wednesday, October 27, 2010
Posted by D. Daniel Sokol
Yassine LeFouili (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL)) and Catherine Roux (University of Lausanne, Faculty of Business and Economics) have an interesting paper on Leniency programs for multimarket firms: The effect of Amnesty Plus on cartel formation.
ABSTRACT: We examine the effect of the Amnesty Plus policy on the incentives of firms to engage in cartel activities. Amnesty Plus is aimed at attracting amnesty applications by encouraging firms, convicted in one market, to report their collusive agreements in other markets. It has been vigorously advertised that Amnesty Plus weakens cartel stability. We show to the contrary that Amnesty Plus may not have this desirable effect, and, if improperly designed, may even stabilize a cartel. We suggest a simple discount-setting rule to avoid this anticompetitive effect.