Scandinavian Working Papers in Economics

Konkurrensverket Working Paper Series in Law and Economics,
Konkurrensverket (Swedish Competition Authority)

No 2014:1: Heterogeneous Penalties and Private Information

Catarina Marvão ()
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Catarina Marvão: Trinity College Dublin

Abstract: 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

JEL-codes: D43; K21; K42; L13; L51

40 pages, September 18, 2014

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