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Are Treble Damages Neutral? Sequential Equilibrium and Private Antitrust Enforcement

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  • Besanko, David
  • Spulber, Daniel F

Abstract

A sequential equilibrium model of private antitrust enforcement is presented. Consumers have incomplete information about cartel costs and cannot accurately estimate a priori the damage recovery from an antitrust action. Consumers are able to infer cartel costs from the equilibrium pricing strategy of firms. The universal divinity criterion is used to characterize the sequential equilibrium. It is shown that, for a sufficiently large damage multiple, antitrust enforcement effectively increases social welfare. Copyright 1990 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 80 (1990)
Issue (Month): 4 (September)
Pages: 870-87

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Handle: RePEc:aea:aecrev:v:80:y:1990:i:4:p:870-87

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Cited by:
  1. Schwartz, Warren F. & Wickelgren, Abraham L., 2011. "Optimal antitrust enforcement: Competitor suits, entry, and post-entry competition," Journal of Public Economics, Elsevier, vol. 95(7), pages 967-972.
  2. Joseph E. Harrington, Jr. & Joe Chen, 2005. "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection," CIRJE F-Series CIRJE-F-359, CIRJE, Faculty of Economics, University of Tokyo.
  3. Gianmaria Martini, 2002. "Antitrust Policy and Collusion through Credible Covenants," Working Papers 0204, University of Bergamo, Department of Economics.
  4. Gianmaria MARTINI & Cinzia ROVESTI, 2004. "Antitrust policy and price collusion : public agencies vs delegation," Discussion Papers (REL - Recherches Economiques de Louvain) 2004021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  5. R. Preston McAfee & Hugo Mialon & Sue Mialon, 2005. "Private v. Public Antitrust Enforcement: A Strategic Analysis," Emory Economics 0523, Department of Economics, Emory University (Atlanta).
  6. Schinkel,Maarten Pieter & Rüggeberg,Jakob & Tuinstra,Jan, 2003. "Illinois Walls," Research Memoranda 027, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
    • Schinkel, M.P. & Tuinstra, J. & Rueggeberg, J., 2004. "Illinois Walls," CeNDEF Working Papers 04-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  7. Maarten Pieter Schinkel & Jan Tuinstra & Jakob Rüggeberg, 2008. "Illinois Walls: how barring indirect purchaser suits facilitates collusion," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 683-698.
  8. Bourjade, Sylvain & Rey, Patrick & Seabright, Paul, 2009. "Private Antitrust Enforcement in the Presence of Pre-Trial Bargaining," TSE Working Papers 09-041, Toulouse School of Economics (TSE).
  9. Joseph E. Harrington, 2005. "Optimal Cartel Pricing In The Presence Of An Antitrust Authority," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 145-169, 02.
  10. Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics.

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