Thursday, October 28, 2010

Prosecution and Leniency Programs: a Fool's Game

Posted by D. Daniel Sokol

Julien SAUVAGNAT discusses Prosecution and Leniency Programs: a Fool's Game.

ABSTRACT: We present a model where the Antitrust Authority is privately informed about the strength of the case against a given cartel. In this context, the Antitrust Authority may obtain cartel members' confessions even when it opens an investigation knowing that it has no chance to find hard evidence. More generally, we show that offering leniency allows to raise the conviction rate, which in turn enhances cartel desistance and cartel deterrence. A second contribution of the paper is to show that the optimal leniency scheme involves a single informant rule. That is, amnesty should be given only if a unique cartel member reports information.

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