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Bounds on the damages from a price overcharge

Author

Listed:
  • Sander Heinsalu

    (Compass Lexecon)

Abstract

In antitrust cases where the defendant, whether it's a cartel or a dominant supplier, overcharges a firm, the defendant typically makes three claims: (1) the firm passed on the higher price to its customers, (2) its sales volume did not decrease materially, and (3) the damages are small. To calculate the damages, these cases usually estimate the price pass-on and sometimes consider the volume decrease. This study establishes direct bounds on the damages using minimal data: the sales figures with and without the overcharge, along with the exact amount of the overcharge. These bounds reduce the risk of over- or under-compensation and offer a sense-check on any alternative estimates of the damages.

Suggested Citation

  • Sander Heinsalu, 2023. "Bounds on the damages from a price overcharge," Economics Bulletin, AccessEcon, vol. 43(3), pages 1265-1270.
    • Handle: RePEc:ebl:ecbull:eb-23-00239
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2023/Volume43/EB-23-V43-I3-P107.pdf
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    References listed on IDEAS

    as
    1. Seade, J, 1985. "Profitable Cost Increases and the Shifting of Taxation : Equilibrium Response of Markets in Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 260, University of Warwick, Department of Economics.
    2. Norman J. Ireland, 1984. "Dual Equilibria and Discontinuous Response in Monopolistic Competition with Two Classes of Consumers," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 377-384, Autumn.
    3. FRANK VERBOVEN & THEON van DIJK, 2009. "Cartel Damages Claims And The Passing‐On Defense," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 457-491, September.
    4. Seade, J., 1985. "Profitable Cost Increases and the Shifting of Taxation: Equilibrium Responses of Markets in Oligopoly," Economic Research Papers 269225, University of Warwick - Department of Economics.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    pass-on; volume effect; private damages; cartel overcharge; abuse of dominance;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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