An Improvement of Leniency Programs Where There Exists the Coordination Problem

Abstract

Leniency programs have become one of important tools in cartel enforcement. In recent years there has been a decrease in leniency applications, and growth of the applications, under current leniency programs based on Prisoner's Dilemma, is limited unless an institutional circumstance about the programs is changed. I suggest revising leniency programs by improving the coordination problem among cartel participants in order to stimulate the incentive of cartel participants to report collusion where no application is made. I suggest a leniency program with a minimum-evidence standard (i) giving applicants rewards funded by the fines paid by cartel participants that do not report collusion, and (ii) selecting candidates for immunity according to the order of application and reducing fines of candidates that provide evidence above a minimum-evidence standard.