The Department of Justice Leniency Program and the Dissolution of Cartels in a Game of Mixed Strategies

Open Access
Author:
Kincheloe, Connor M
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Edward James Green, Thesis Supervisor
  • Russell Paul Chuderewicz, Honors Advisor
Keywords:
  • Cartels
  • Collusion
  • Leniency Program
  • Mixed Strategies
Abstract:
Cartels cause harm to economic markets as they charge higher than normal prices and supply a lower quantity than a market that is operating under competition. Since cartels are mostly secretive agreements, society does not know how many cartels are currently, or have been, in operation. The U.S. Department of Justice devotes resources to successfully discover and prosecute cartels to return the market into a competitive balance. In 1993, the Department of Justice implemented its Leniency Program, which would give firms reduced fines for self-reporting their involvement. Many papers have sought to analyze how this policy affects the incentive structure of colluding firms, and have searched for the optimal policy. This paper seeks to advance on the framework that has been put in place by previous authors, while synthesizing and clarifying some of the existing literature. This paper will also examine how the Leniency Program will function under the conditions of an increasing probability of investigation and conviction in a game of mixed strategies.