WP 2020-03: Incentive to Squeal: An Experiment on Leniency Programs for Antitrust Violators

Working Paper No. 2020-03 
Incentive to squeal: an experiment on leniency programs for antitrust violations
Benjamin Radoc, Philip Amadeus Libre, Shanti Aubren Prado

Competition authorities around the world have adopted leniency programs creating incentives for cartel members to come forward and provide information sufficient for cartel prosecution. We conducted a laboratory experiment simulating an infinitely repeated 4-player Bertrand game with homogeneous goods. The experiment allowed us to determine the effect of detection rate, penalty discount, and penalty rate on cartel formation and leniency application. Similar to past studies, we find that imposing a leniency program effectively deters cartel formation. However, surviving cartels quickly learn to cooperate. Leniency application is dependent on the immunity incentive (full penalty discount) and the risk of cartel detection, but not on the penalty rate.

Keywords: antitrust, cartel, experiment, leniency program