Corporate Leniency in a Dynamic World: The Preemptive Push of an Uncertain Future

This paper investigates how leniency programs induce collusive offenders to self report in a dynamic setting, where the risk of independent detection evolves stochastically over time. We show how uncertainty about the future can push firms into preemptive application, and how these preemptive incent...

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Bibliographic Details
Published in:The Journal of industrial economics 2022-03, Vol.70 (1), p.119-146
Main Author: Gärtner, Dennis L.
Format: Article
Language:English
Subjects:
Companies
Leniency
Offenders
Rewards
Uncertainty
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Summary:This paper investigates how leniency programs induce collusive offenders to self report in a dynamic setting, where the risk of independent detection evolves stochastically over time. We show how uncertainty about the future can push firms into preemptive application, and how these preemptive incentives can unravel to the point where firms apply long before the risk of detection is in any way imminent. For policy, the analysis suggests that a relatively harsh treatment of latecomers may be more important than offering high absolute reductions or even rewards, and that leniency should be available to firms who are already under investigation.
ISSN:0022-1821
1467-6451
DOI:10.1111/joie.12265