Heterogeneous Penalties and Private Information
Konkurrensverket Working Paper No. 2014:1
44 Pages Posted: 5 Sep 2014 Last revised: 19 Oct 2014
Date Written: June 24, 2014
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: Suggested Citation