Keep to Sustain or Keep to Exploit? Why Firms Keep Hard Evidence

Keep to Sustain or Keep to Exploit? Why Firms Keep Hard Evidence

Agisilaou, P.

We develop a model wherein collusive firm’s decisions to keep or to destroy the hard evidence is endogenous. Unlike previous literature, we assume that the administration of the cartel crucially depends on the existence of the hard evidence. Within this framework, we explore the impact of a leniency program on whether firm’s incentives are to destroy or keep the hard evidence. Moreover, we examine firm’s incentives to report or not to report the hard evidence to the antitrust authority. We show that firms may be wilfully keep the hard evidence, even if a leniency program is not available, in order to enhance the stability of a cartel. Additionally, we prove that firms are more inclined to keep the hard evidence when a leniency program is available. Finally, we demonstrate that firms are more likely to destroy the hard evidence when the collusive profits-fine ratio increases