The impact of leniency and whistle-blowing programs on cartels

Antitrust authorities have set up leniency programs for cartel members that denounce their collusive agreements. These programs help prosecute participants and can thereby deter collusion. We compare the impact of reduced fines and positive rewards and argue that rewarding individuals, including firm employees, can deter collusion in a more effective way. We discuss possible adverse effects of whistle-blowing programs on firms' behavior, and particularly on turnover, incentives to innovate and cooperation. We also explore explanations for the puzzling fact that managers keep incriminating evidence and argue reward programs actually provide additional incentives for keeping such evidence.