Leniency Policies and Cartel Success: An Experiment

Abstract

Cartels are often fought by granting leniency, in the form of forgiveness of penalties, to whistle-blowers. This study employs a laboratory experiment to compare leniency programs that differ with respect to fine size and whether a second whistle-blower may apply for leniency. The results show that leniency does not affect the probability that a cartel forms, but is effective in exposing cartels and thereby inhibiting cartel success. Higher fines are more effective, but allowing leniency to a second whistle-blower is no more effective than granting leniency to only one whistle-blower.