Leniency Programs and the Design of Antitrust: Experimental Evidence with Free-Form Communication
- PDF / 1,132,988 Bytes
- 24 Pages / 439.37 x 666.142 pts Page_size
- 20 Downloads / 149 Views
Leniency Programs and the Design of Antitrust: Experimental Evidence with Free‑Form Communication Peter T. Dijkstra1 · Marco A. Haan2 · Lambert Schoonbeek2 Accepted: 23 September 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract We present experimental evidence on the effectiveness of corporate leniency programs. Different from other leniency experiments, ours allows subjects to have freeform communication. We do not find much of an effect of leniency programs. Leniency does not deter cartels. It only delays them. Free-form communication allows subjects to build trust and resolve conflicts. Reporting and defection rates are low, especially when compared to experiments with restricted communication. Indeed, communication is so effective that, with leniency in place, prices are not affected if cartels are fined and cease to exist. Keywords Antitrust · Cartels · Experiment · Leniency program JEL Classification C92 · L41
1 Introduction One of the main tasks of antitrust authorities is to fight cartels. Leniency programs can help. In such programs, an Antitrust Authority (AA henceforth) offers a fine reduction to firms that report a cartel. Since the introduction of leniency programs, the number of cartels prosecuted has increased in both the United States and European Union (Motta 2004; Spagnolo 2008). Whether this is due to the success of * Peter T. Dijkstra [email protected] Marco A. Haan [email protected] Lambert Schoonbeek [email protected] 1
Netherlands Authority for Consumers & Markets (ACM), PO Box 16326, 2500 BH The Hague, The Netherlands
2
Department of Economics, Econometrics and Finance, University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands
13
Vol.:(0123456789)
P. T. Dijkstra et al.
leniency programs or merely reflects an increase in cartel activity is unclear. Since cartels are secretive, it is hard to assess this empirically.1 Experimental methods may shed some light. In most leniency experiments in the literature, subjects can communicate in a restricted manner, essentially by sending signals. Yet, studies without leniency have shown that lessons drawn from cartel experiments with restricted communication may not translate to environments with free-form communication: Where natural conversation is possible. Free-form communication may be important in building trust, resolving conflicts, and coordinating collusive strategies. If free-form communication allows firms to build trust, the question becomes whether leniency programs can break that trust. We therefore study a leniency experiment that allows for free-form communication. We let subjects play a repeated game and allow them to discuss anything via a computer chat. To the best of our knowledge, we are the first to do so.2 However, once subjects decide to communicate, they are technically in a cartel and hence may be prosecuted. One other important innovation is that we allow subjects to report after they have learned that an AA has started an investigation. This also gives su
Data Loading...
