Thursday, September 29, 2011

Cartel Ringleaders and the Corporate Leniency Program

Posted by D. Daniel Sokol

Iwan Bos, University of Amsterdam - Amsterdam Center for Law & Economics and Amsterdam Business School Frederick Wandschneider, University of East Anglia (UEA) - Centre for Competition Policy, University of East Anglia (UEA) - School of Economic and Social Studies, University of East Anglia (UEA) - Centre for Behavioural and Experimental Social Science (CBESS) have an interesting paper on Cartel Ringleaders and the Corporate Leniency Program.

ABSTRACT: Cartel ringleaders can apply for amnesty in some jurisdictions (e.g., the E.U.), whereas in others they are excluded (e.g., the U.S.). This paper provides a survey of identified ringleaders in recent European cartel cases and explores theoretically the effect of ringleader exclusion on collusive prices. Our survey shows that cartels often had more than one ringleader, the role of ringleaders was very diverse and ringleaders were typically the largest cartel members. Our theoretical analysis reveals that ringleader exclusion leads to higher prices when the joint profit maximum cannot be sustained under a non-discriminatory leniency policy, antitrust fines depend on individual cartel gains in a nonlinear fashion and the size distribution of members is sufficiently heterogeneous. These findings support the imposition of antitrust penalties proportional to firm size when ringleaders are excluded from the corporate leniency program.

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