Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, April 12, 2021

The Leniency Rule Revisited: Experiments on Cartel Formation with Open Communication

The Leniency Rule Revisited: Experiments on Cartel Formation with Open Communication

 

Maximilian Andres

University of Potsdam

Lisa Bruttel

Humboldt University of Berlin

Jana Friedrichsen

Humboldt University of Berlin - Faculty of Economics; WZB Berlin Social Science Center; German Institute for Economic Research (DIW Berlin)

Abstract

The experimental literature on antitrust enforcement provides robust evidence that communication plays an important role for the formation and stability of cartels. We extend these studies through a design that distinguishes between innocuous communication and communication about a cartel, sanctioning only the latter. To this aim, we introduce a participant in the role of the competition authority, who is properly incentivized to judge communication content and price setting behavior of the firms. Using this novel design, we revisit the question whether a leniency rule successfully destabilizes cartels. In contrast to existing experimental studies, we find that a leniency rule does not affect cartelization. We discuss potential explanations for this contrasting result.

https://lawprofessors.typepad.com/antitrustprof_blog/2021/04/the-leniency-rule-revisited-experiments-on-cartel-formation-with-open-communication.html

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