Heterogeneous Penalties and Private Information

Konkurrensverket Working Paper No. 2014:1

44 Pages Posted: 5 Sep 2014 Last revised: 19 Oct 2014

See all articles by Catarina M. P. Marvão

Catarina M. P. Marvão

Technological University Dublin; Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE)

Date Written: June 24, 2014

Abstract

The theoretical framework of the adequacy or otherwise of fine reductions under the EU and US Leniency Programmes has been explored widely. However, the characteristics of the reporting cartel members remain unexplained. This is the first paper to develop a model where cartel members are heterogeneous in terms of the cartel fine and have private information on the probability of conviction. It is shown that firms which receive higher fines, have a lower equilibrium threshold for reporting. To validate this result and analyze the sources of fine heterogeneity, data for EU and US cartels are used. Being the first reporter is shown to be correlated with recidivism, leadership and reductions received outside the Leniency Programme. Some characteristics of the cartels where reporting occurred are also unveiled. Identifying the characteristics of the reporting firms is vital to dissolve and dissuade cartels and the wider policy implications of these findings are discussed in the paper.

Keywords: Cartels, competition policy, Leniency Programme, private information, self-reporting

JEL Classification: D43, K21, K42, L13, L4, L51

Suggested Citation

Marvão, Catarina Moura Pinto, Heterogeneous Penalties and Private Information (June 24, 2014). Konkurrensverket Working Paper No. 2014:1 , Available at SSRN: https://ssrn.com/abstract=2491151 or http://dx.doi.org/10.2139/ssrn.2491151

Catarina Moura Pinto Marvão (Contact Author)

Technological University Dublin ( email )

Dublin
Ireland

Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE) ( email )

P.O. Box 6501
S-113 83 Stockholm, 11383
Sweden

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