Corporate Leniency Programs when Firms have Private Information: The Push of Prosecution and the Pull of Pre-emption

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A corporate leniency program provides relief from government penalties to the first member of a cartel to cooperate with the authorities. This study explores the incentives to apply for leniency when each cartel member has private information as to the likelihood that the competition authority will be able to convict them without a cooperating firm. A firm may apply for leniency because it fears being convicted (‘prosecution effect’) or because it fears another firm will apply (‘pre-emption effect’). Policies by the competition authority to magnify concerns about pre-emption—and thereby induce greater use of the leniency program—are also explored.