What is the theory behind fines and leniency rules?

With fines, the likelihood of cartel formation becomes smaller due to greater risk and less expected returns. Effect of leniency rules: 1. In theory, a firm might participate in a cartel to gain some benefit and then report it to the authorities. However, that is very risky and hence unlikely in practice. 2. The likelihood of the cartel being stable decreases as there is an incentive to report the rest of the cartel to the authorities. (See prisoners dilemma). 3. On the other hand, cartels might be stronger as other cartel members can sanction a cartel member. 4. Argument 2 is the most important in practice (The cartels becoming unstable)