Leniency degree and cartel (in)stability in the lab
We develop a dynamic experiment derived from the centipede game where subjects in pairs have to decide sequentially whether to stay competitive or start a very profitable collusive agreement. Once cartels have been started, they can de dismantled through a random investigation of a exogenous Competition Authority or through Leniency seeking by any of the colliders. We also allow subjects to communicate their intentions of continuing colluding using closed-form messages. In our design we consider two dimensions: i) The Leniency degree for the whistleblower and ii) whereas messages increases the chance of investigation. Our results indicate that messages are used less frequently when costly but that do not decrease significantly cartel formation and that a greater Leniency degree have negative effects in terms of market efficiency.