Working Paper: CEPR ID: DP13262
Authors: Winand Emons
Abstract: An antitrust authority deters collusion using fines and a leniency program. It chooses the probability of an investigation. Firms pick the degree of collusion: The more they collude, the higher are profits, but so is the probability of detection. Firms thus trade-off higher profits against higher expected fines. If firms are sufficiently patient, leniency is ineffective; it may even increase collusion. Increasing the probability of an investigation at low levels does not increase deterrence. Increasing the probability of an investigation at high levels reduces collusion, yet never completely.
Keywords: antitrust; cartels; deterrence; leniency
JEL Codes: D43; K21; K42; L40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| patience (Y60) | collusion (D74) |
| leniency (K21) | collusion (D74) |
| probability of investigation (C99) | collusion (D74) |
| leniency (K21) | deterrence (K42) |
| probability of investigation (C99) | deterrence (K42) |