Economic Theory

, Volume 31, Issue 1, pp 143–166 | Cite as

Blowing the Whistle

  • Jose Apesteguia
  • Martin Dufwenberg
  • Reinhard Selten
Research Article
First Online:
Received:
Accepted:

Abstract

Leniency clauses, offering cartelists legal immunity if they blow the whistle on each other, is a recent anti-trust innovation. The authorities wish to thwart cartels and promote competition. This effect is not evident, however; whistle-blowing may enforce trust and collusion by providing a tool for cartelists to punish each other. We examine the impact of leniency law, and other rules, experimentally.

Keywords

Anti-trust Leniency Immunity Amnesty Blow the whistle Cartels Price competition Bertrand model Experiment communication 

JEL Classification Numbers

C92 D43 L13 
This is a preview of subscription content, log in to check access.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Abbink, K., Brandts, J.: 24. Unpublished manuscript (2004)Google Scholar
  2. Abbink, K., Brandts, J.: Collusion in growing and shrinking markets: empirical evidence from experimental duopolies. Unpublished manuscript (2005)Google Scholar
  3. Abbink, K., Sadrieh, A.: RatImage – Research assistance toolbox for computer-aided human behavior experiments. SFB Discussion Paper B-325, University of Bonn (1995)Google Scholar
  4. Aubert, C., Rey, P., Kovacic, W.: The impact of leniency programs on Cartels. Unpublished manuscript (2003)Google Scholar
  5. Bornstein G. Gneezy U. (2002). Price competition between teams. Exp Econ 5:29–38CrossRefGoogle Scholar
  6. Brown-Kruse J.L., Cronshaw M.B., Shenk D.J. (1990). Theory and experiments on spatial competition. Econ Inquiry 31:139–65Google Scholar
  7. Brown-Kruse J.L., Rassenti S., Reynolds S.S., Smith V.L. (1994). Bertrand-Edgeworth competition in experimental markets. Econometrica 62:343–361CrossRefGoogle Scholar
  8. Buccirossi, P., Spagnolo, G.: The effects of leniency on illegal transactions: how (Not) to fight corruption. Unpublished manuscript (2001)Google Scholar
  9. Cason T.N. (1995). Cheap talk price signaling in laboratory markets. Econ Policy 7:183–204CrossRefGoogle Scholar
  10. Cason T.N., Davis D.D. (1995). Price communications in a multi-market context: an experimental investigation. Rev Ind Organ 10:769–87CrossRefGoogle Scholar
  11. Cason T.N., Friedman D. (1997). Price formation in single call markets. Econometrica 65:311–345CrossRefGoogle Scholar
  12. Cason T.N., Friedman D. (2003). Buyer search and price dispersion: a laboratory study. J Econ Theory 112:232–260CrossRefGoogle Scholar
  13. Charness, G., Dufwenberg, M.: Promises & partnership. Unpublished manuscript (2005)Google Scholar
  14. Davis D.D., Wilson B.J. (2002). Collusion in procurement auctions: an experimental examination. Econ Inquiry 16:545–565Google Scholar
  15. Davis D.D., Wilson B.J. (2005). Differentiated product competition and the antitrust logit model: an experimental analysis. J Econ Behav Organ 57:89–113CrossRefGoogle Scholar
  16. Davis D.D., Wilson B.J. (2000). Firm-specific cost savings and market power. Econ Theory 16:545–565Google Scholar
  17. Deck C., Wilson B.J. (2003). Automated pricing rules in electronic posted offer markets. Econ Inquiry 41:208–223CrossRefGoogle Scholar
  18. Dufwenberg M., Gneezy U. (2000). Price competition & market concentration: an experimental study. Int J Ind Organ 18:7–22CrossRefGoogle Scholar
  19. Dufwenberg, M., Gneezy, U., Goeree, J.K., Nagel, R.: Price floors & competition. Unpublished manuscript (2005)Google Scholar
  20. Dugar, S.: Do price-matching guarantees facilitate tacit collusion? an experimental study. Unpublished manuscript (2005)Google Scholar
  21. Dugar, S. & Sorensen, T.: Hassle Costs, price-matching guarantees and price competition: an experiment. Unpublished manuscript (2005)Google Scholar
  22. Ellis, C.J., Wilson, W.W.: Cartels, price-fixing, and corporate leniency policy: What doesn’t kill us makes us stronger. Unpublished manuscript (2003)Google Scholar
  23. European Commission: Commission adopts new leniency policy for companies which give information on cartels. Press release, Brussels, Feb. 13, 2002 (2002a) [http://europa.eu.int/rapid/ start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/02/247|0|RAPID&lg=EN]Google Scholar
  24. European Commission: Questions and Answers on the Leniency Policy. MEMO/02/23, Brussels (2002b) [http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=MEMO/02/ 23|0|RAPID&lg=EN]Google Scholar
  25. European Union: Guidelines for setting fines. Offic J Eur Commun OJ C9, 14.01.98 (1998)Google Scholar
  26. Fatás E., Georgantzís N., Máñez J., Sabater-Grande G. (2005). Pro-competitive price beating guarantees: experimental evidence. Rev Ind Organ 26:115–136CrossRefGoogle Scholar
  27. Fouraker L.E., Siegel S. (1963). Bargaining behavior. McGraw-Hill, New YorkGoogle Scholar
  28. Friedman J.W. (1967). Individual behavior in oligopolistic markets. Yale Econ Essays 3:359–417Google Scholar
  29. Grether D.M., Plott C.R. (1984). The effects of market practices in oligopolistic markets: an experimental examination of the ethyl case. Econ Inquiry 24:479–507CrossRefGoogle Scholar
  30. Hamaguchi, Y., Kawagoe, T., Shibata A.: An experimental study of leniency programs. Unpublished manuscript (2005)Google Scholar
  31. Hinloopen, J.: The effectiveness of leniency programs under European Style Antitrust Legislation. Unpublished manuscript (2002)Google Scholar
  32. Holt C.A. (1995). Industrial organization: a survey of laboratory research. In: Kagel J., Roth A. (eds) The handbook of experimental economics. Princeton University Press, PrincetonGoogle Scholar
  33. Holt C.A., Davis D.D. (1990). The effects of non-binding price announcements in posted-offer markets. Econ Lett 34:307–310CrossRefGoogle Scholar
  34. Hong J.T., Plott C.R. (1982). Rate filing policies for inland water transportation: an experimental approach. Bell J Econ 13:1–19CrossRefGoogle Scholar
  35. Hovenkamp, H.: Federal antitrust policy: the law of competition and its practice, 2nd edn., West Wadsworth 2000Google Scholar
  36. Huck S., Normann H.-T., Oechssler J. (2000). Does information about competitors actions’ increase or decrease competition in experimentaloligopoly markets?. Int J Ind Organ 18:39–57CrossRefGoogle Scholar
  37. Isaac M.R., Ramey V., Williams A.W. (1984). The effects of market organization on conspiracies in restraint of trade. J Econ Behav Organ 5:191–222CrossRefGoogle Scholar
  38. Joshua, J.M.: Hold or fold? the commission’s new leniency notice. The European Antitrust Review, A global competition review special report (2003)Google Scholar
  39. Lindqvist T., Stennek J. (2005). The insiders’ dilemma: an experiment on merger formation. Exp Econ 8:267–284CrossRefGoogle Scholar
  40. Mason C.F., Phillips O.R. (1997). Information and cost asymmetry in experimental duopoly markets. Rev Econ Stat 49(2):290–99CrossRefGoogle Scholar
  41. McCutcheon B. (1997). Do meetings in smoke-filled rooms facilitate collusion?. J Polit Econ 105:330–50CrossRefGoogle Scholar
  42. Morgan J., Orzen H., Sefton M. (2006). An experimental study of price dispersion. Games Econ Behav 54:134–158CrossRefGoogle Scholar
  43. Motta M., Polo M. (2003). Leniency programs and Cartel prosecution. Int J Ind Organ 21:347–379CrossRefGoogle Scholar
  44. Mullin C.H., Reiley D.H. (2006). Recombinant estimation for normal-form games, with applications to auctions and bargaining. Games Econ Behav 54:159–182CrossRefGoogle Scholar
  45. OECD Competition Committee: Fighting Hard Core Cartels: Harm, Effective Sanctions and Leniency Programmes. Reports to the Organization for Economic Co-Operation & Development (OECD)-(2002)Google Scholar
  46. Plott C.R. (1989). An updated review of industrial organization: applications of experimental economics. In: Schmalensee R., Willig R.D. (eds) Handbook of industrial organization, vol II. North Holland, AmsterdamGoogle Scholar
  47. Rey P. (2003). Towards a theory of competition policy. In: Dewatripont M., Hansen L.P., Turnovsky S.J. (eds). Advances in economics and econometrics: theory and applications, 8th World Congress. Cambridge University Press, CambridgeGoogle Scholar
  48. Scherer F.M., Ross D. (1990). Industrial market structure and economic performance, 3rd edn. Houghton-Mifflin, BostonGoogle Scholar
  49. Selten R., Apesteguia J. (2005). Experimentally observed imitation and cooperation in price competition on the circle. Games Econ Behav 51:171–192CrossRefGoogle Scholar
  50. Spagnolo, G.: Optimal leniency programs. Unpublished manuscript (2000a)Google Scholar
  51. Spagnolo, G.: Self-defeating antitrust law. Unpublished manuscript (2000b)Google Scholar
  52. Spratling, G.R.: Making companies an offer they shouldn’t refuse: the antitrust division’s corporate leniency policy? – an update. Antitrust Division US Department of Justice (1996) [http://www.usdoj.gov/atr/public/speeches/2247.htm]Google Scholar
  53. Tirole J. (1994). The theory of industrial organization. MIT Press, CambridgeGoogle Scholar
  54. Vives X. (1999). Oligopoly pricing. MIT Press, CambridgeGoogle Scholar

Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  • Jose Apesteguia
    • 1
  • Martin Dufwenberg
    • 2
  • Reinhard Selten
    • 3
  1. 1.Department of Economics and BusinessUniversitat Pompeu FabraBarcelonaSpain
  2. 2.Department of Economics and Economic Science LaboratoryUniversity of ArizonaTucsonUSA
  3. 3.Experimental Economics LaboratoryUniversity of BonnBonnGermany

Personalised recommendations