Trust and Recidivism; the Partial Success of Corporate Leniency Program in the Laboratory

Tinbergen Institute Discussion Paper No. TI 06-067/1

33 Pages Posted: 7 Aug 2006

See all articles by Jeroen Hinloopen

Jeroen Hinloopen

CPB Netherlands Bureau of Economic Policy Analysis; University of Amsterdam - Amsterdam School of Economics (ASE); Tinbergen Institute

Adriaan R. Soetevent

University of Groningen

Date Written: August 2006

Abstract

An experiment is conducted were subjects interact repeatedly to examine the effect of a particular leniency program on cartel formation, cartel stability and cartel recidivism. The program leads to lower prices for three reasons. First, non-cooperators are more persistent in their behavior which effectively blocks cartel formation in their respective groups. Second, members of groups that do form a cartel defect more often thus reducing the average cartel lifetime. Third, the difference between the agreed-upon price and the undercutting price is larger. The leniency program does not however affect the probability that a dismantled cartel is re-established.

Keywords: cartels, corporate leniency programs, Bertrand competition, experiment

JEL Classification: C92, D43, L41

Suggested Citation

Hinloopen, Jeroen and Soetevent, Adriaan R., Trust and Recidivism; the Partial Success of Corporate Leniency Program in the Laboratory (August 2006). Tinbergen Institute Discussion Paper No. TI 06-067/1, Available at SSRN: https://ssrn.com/abstract=922029 or http://dx.doi.org/10.2139/ssrn.922029

Jeroen Hinloopen (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Adriaan R. Soetevent

University of Groningen ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
++ 31 50 363 7018 (Phone)

HOME PAGE: http://www.soetevent.com

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