DP10106 Optimal Leniency Programs when Firms Have Cumulative and Asymmetric Evidence

Author(s): Marc Blatter, Winand Emons, Silvio Sticher
Publication Date: August 2014
Keyword(s): antitrust, cartels, deterrence, evidence, leniency
JEL(s): D43, K21, K42, L40
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10106

An antitrust authority deters collusion using fines and a leniency program. Unlike in most of the earlier literature, our firms have imperfect cumulative evidence of the collusion. That is, cartel conviction is not automatic if one firm reports: reporting makes conviction only more likely, the more so, the more firms report. Furthermore, the evidence is distributed asymmetrically among firms. Asymmetry of the evidence can increase the cost of deterrence if the high-evidence firm chooses to remain silent. Minimum-evidence standards may counteract this effect. Under a marker system only one firm reports; this may increase the cost of deterrence.