We spend some time to know some papers over the past. Motta and Polo (2003) studied and concluded that the government should let the confessors or the whistle blowers have the full immunity to all the other firms under the model is the equilibrium. And they also put emphasis on that a leniency program may encourage pro-collusive effect as the Antitrust Authority is short of resources. Hence, they leniency program is the second best and should be implemented as the authority has sufficient resources. Ellis and Wilson (2003) assumed that there are three ways firms can choose: comply with the collusion rules and become a cartel, comply with the leniency policy, squeal to the Antitrust Authority and be detected by other forms under a probability or not be detected fortunately. The studies showed that firms may squeal to the cartel office because they want to beat the competitors by lowering their profit and raise their cost which caused by the fines. And this is a strategic advantage for the firms to squeal. They also thought the concentration of market is an important element to affect cartel. When the market is under less concentration, leniency policy may destabilize the cartel. On the contrary, leniency programs make firms become stronger cartels when they don’t induce firms to confess to the Antitrust Authority. Firms have the mechanism of self-stabilization. Spagnolo (2004) thought that under dynamic analysis, leniency policy would be useful if the cartel office create incentives for firms to cheat on partners. So the incentive is the super high reward for the first one to squeal. And the reward is from the fines paid by all other parties. When leniency policy is implemented in reality, may also destabilize and deter cartel by (a) protecting the squealers from fines; (b) protecting them from the others agents’ punishment; (c) increasing the riskiness of being a cartel. Compare to the view of Motta and Polo (2003), the difference between them is that leniency is affective only because of immunity by the view of Motta and Polo (2003). Aubert et al. (2006) discussed about
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the leniency policy with some brand new view. They compared the impact of reduced fines and positive reward, and argue that rewarding individuals, including employees of firms, may be more effective to deter cartel than traditional leniency policy. Chavda and Jegers (2007) used an oligopoly model to analyze the policy. At first glance, we usually think fines deter the cartel in reason of sapping the benefit and raise the risk involved in illicit behavior. However, their study showed that fines tend to increase the stability of an agreement. If the impunity is granted for firms, cheating is the most profit way. To fight with the collusive behavior, Antitrust Authorities all over the world use combinations of fines and fine exemptions. That is the effectiveness of leniency policy. Blum et al. (2008) challenged the contemporary view that standard leniency privilege is incentive- compatible to increase competition. They thought leniency policy is a preemptive strike for firms against competitors when cartels become unstable. The defectors may have more economical privilege in the future.
Accordingly, if the leniency policy would lead to more competition in the market, the policy should be welcomed by the national cartel offices. Brisset and Thomas (2004) discussed about the impact of leniency policy on incentives within cartels. And they wanted to find a way to encourage the cartel members to confess and implicate their co-conspirators with hard evidence about their collusive agreement. They developed a simple model of cartel behavior under a first-price sealed-bid procurement auction and found whether an effective leniency program can prevent the internal coordination of cartel members. Somehow, they found out that the rules of the actual European program present some inefficiency. For example, any member who reports the cartel before any investigation can has a full exemption from fine. Besides, they also showed that how the leniency program could become an effective tool for the prevention of anti-competitive behavior by rewarding firms that provide hard evidence of the cartel’s existence. Then the leniency programs can create private
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incentives to play inefficient firms against efficient ones. Ishibashi and Shimizu (2010) used a model of quantity competition to analyze the leniency policy in antitrust laws.
They concluded that an amnesty to the second or later candidates of a leniency program is useless if colluding firms can choose the most profitable collusion. And their result implied that the design of a leniency policy depends on which kinds of market structure are prevalent in the countries. Bigoni et al. (2012) thought there are more countries using leniency policy to control the actions of collusion. And they studied how fine, leniency programs and rewards for whistleblowers affect cartel formation and prices from an actual experience. But their effects on cartel formation and prices are hard to observe. In their experiment, traditional antitrust law enforcement without leniency policy has a significant deterrence effect that fewer cartels form. But without leniency, surviving cartels’ prices grow, which means the overall prices do not fall. Leniency can help fix this problem. Leniency programs further increase cartel deterrence, but also stabilize surviving cartels relative to a laissez-faire regime. So when fines are used as rewards for self-reporting agents, prices fall significantly and antitrust enforcement improves welfare. Hinloopen (2003) analyzed with a dynamic model to know the cartel members’ incentives to report the existence of the cartel to antitrust authorities under leniency programs. And the model incorporates detection probabilities that can differ in each period. It takes time for antitrust authorities to detect a cartel and then to provide enough hard proof for it to be dismantled. The author concluded increasing the reduction in fine payment in return for reporting an illegal cartel and increasing the per-period detection probability in any future period enhances the efficiency.
In this paper, we would discuss about the impact of different antitrust laws on firms. For example, the antitrust authorities ask firms hand in their appliance beforehand to be legal. Or after-the-fact policy which means cartels can be legal as
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they are good for the whole society even they don’t tell the antitrust authorities first.
Blum et al. (2008) only categorized the games corresponded the areas in the figures, but we directly solved Bayesian Nash Equilibriums of the cartel game. And furthermore, we discussed the degree of difficulty to form cartels under different national antitrust laws.
‧ homogeneous under the general condition, which means the two firms have the same condition of abilities. There are two kinds of situation for firms to react. Firms can comply, which means the two firms adhere to their cartel agreement. Still, firms can defect, which means one or both of them would squeal to the antitrust authorities.
As for the antitrust authorities, they must want the leniency policy to be useful and be attractive for any party to defect. So, leniency privilege must be known for regard as an improved cost structure or getting an increased market share. If leniency privilege is not only for the first mover but also granted to the subsequent confessing parties, the authority may offer the confessors a reward,z, instead of w. As we can see,z applies to the second confessor in the model, and z[0, ]w . And note that z