Economic Experiment Analysis on Leniency Program

Abstract

Based on Hinloopen and Soetevent (2005), this paper experimentally investigates which of two types of programs refrains the cartel stability: fine reduction program or rewards program. The former program grants full or partial immunity from fines for cartel members who report a cartel to the antitrust authority; The latter grants rewards for the whistleblower. We find the followings. The average bid price in the former program is higher than that in the latter. The similar results hold for both the rate of cartel activities and that of cartel recidivism. Thus, the latter is more desirable from the viewpoint of cartel deterrence.