The Leniency Rule Revisited: Experiments on Cartel Formation with Open Communication

Abstract

The experimental literature on antitrust enforcement provides robust evidence that communication plays an important role for the formation and stability of cartels. We extend these studies through a design that distinguishes between innocuous communication and communication about a cartel, sanctioning only the latter. To this aim, we introduce a participant in the role of the competition authority, who is properly incentivized to judge communication content and price setting behavior of the firms. Using this novel design, we revisit the question whether a leniency rule successfully destabilizes cartels. In contrast to existing experimental studies, we find that a leniency rule does not affect cartelization. We discuss potential explanations for this contrasting result.

The Effects of Private Damage Claims on Cartel Activity: Experimental Evidence

“…Clemens and Rau (2018) investigate leniency policies that discriminate against ringleaders and find that this, paradoxically, stabilizes collusion. Andres et al (2021) add an innovative element to the experimental leniency literature by having participants play the role of the cartel authority. In a cartel experiment without leniency, Gillet et al (2011) investigate how the managerial decision-making process affects cartel formation and pricing.…”