Monday, January 6, 2014
Dennis L. Gartner, University of Bonn - Faculty of Law & Economics explores Corporate Leniency in a Dynamic World: The Preemptive Push of an Uncertain Future.
ABSTRACT: This paper explores the incentives for collusive offenders to apply for leniency in a dynamic setting, where the risk of being independently caught evolves stochastically over time. We show how such future uncertainty can push firms into preemptive application, and that these preemptive incentives may in fact unravel to the point where firms apply long before the risk of independent detection is in any way imminent. The analysis sheds light on factors and policy instruments which favor such an unraveling effect. These include: little discontinuity in time and state, firms’ patience, and a relatively harsh treatment of firms which fail to preempt other whistleblowers. In contrast, the described effects do not necessarily require a very high absolute level of leniency reduction, or even rewards.