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American Economic Review: Vol. 99 No. 3 (June 2009)

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Strategic Leniency and Cartel Enforcement

Article Citation

Miller, Nathan H. 2009. "Strategic Leniency and Cartel Enforcement." American Economic Review, 99(3): 750-68.

DOI: 10.1257/aer.99.3.750

Abstract

The cornerstone of cartel enforcement in the United States and elsewhere is a commitment to the lenient prosecution of early confessors. A burgeoning gametheoretical literature is ambiguous regarding the impacts of leniency. I develop a theoretical model of cartel behavior that provides empirical predictions and moment conditions, and apply the model to the complete set of indictments and information reports issued over a 20-year span. Statistical tests are consistent with the notion that leniency enhances deterrence and detection capabilities. The results have implications for market efficiency and enforcement efforts against cartels and other forms of organized crime. (JEL D43, L12, L13, K21)

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Authors

Miller, Nathan H. (U CA, Berkeley)

JEL Classifications

D43: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
K21: Antitrust Law
L12: Monopoly; Monopolization Strategies
L13: Oligopoly and Other Imperfect Markets


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