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Coordinating Antitrust Policies Against International Cartels

Hiroo Iwanari, Toshiji Kawagoe, Taisuke Matsubae, Hirokazu Takizawa
Wed, 2007-08-01

Theoretical research on leniency programs has so far focused attention on cartels formed within a country; the purpose of the paper is to analyze the situation where a cartel is formed internationally. We consider a model with two firms operating in two countries. The antitrust authority (AA) in each country chooses either to implement a leniency program or to use traditional investigation to detect/deter cartel activity. Given the combination of antitrust policies, the two firms play market games simultaneously in both countries. Assuming that the information on the existence of a cartel in one country spills over to the other, we analyze a strategic interdependency faced by the AAs. Several policy objectives of the AA are considered. We find that if the objective is to maximize revenues from the penalty imposed on cartels, an asymmetric equilibrium exists in which one country chooses to free-ride the other's choosing a leniency program.