Monday, June 6, 2011
Posted by D. Daniel Sokol
Julien Sauvagnat, Toulouse School of Economics describes Prosecution and Leniency Programs: A Fool's Game.
ABSTRACT: We present a model in which the Antitrust Authority is privately informed about the strength of a cartel case. We show that the Antitrust Authority can then obtain confessions even when it has no chance of finding hard evidence. More generally, offering leniency raises the conviction rate, which in turn enhances cartel desistance and cartel deterrence. We also show that the optimal leniency scheme involves a single informant rule. That is, amnesty should be given only when a single cartel member reports information. Finally, we discuss the policy implications of the model.