Exploitation and Induced Tacit Collusion: A Classroom Experiment of Corporate Leniency Programs

Abstract

Recent laboratory experiments support the popular view that the introduction of corporate leniency programs has significantly decreased cartel activity. We develop a classroom experiment that captures key features of leniency programs. Our treatments include an exploitable and a non-exploitable leniency program to highlight possible adverse effects of leniency programs that are too generous. We also examine to what extent a non-exploitable leniency program triggers tacit collusion. The experimental results show that if the efforts of the antitrust authority and the leniency program are directed exclusively to the most straightforward collusive scheme, subjects manage to switch to a more intricate form of coordination. This shift from overt collusion to tacit collusion can serve as the basis for a classroom discussion about the effectiveness of actual leniency programs.