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Imperfect competition law enforcement

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  • Schinkel, Maarten Pieter
  • Tuinstra, Jan

Abstract

Competition policy is a subject of often heated debate. Competition authorities, seeking to battle anticompetitive acts in complex cases to the best of their abilities, regularly find themselves advised by rival economic theories and disputed empirical analyses. As a consequence, there is a real possibility that they may occasionally err, missing true violations of competition law or finding firms liable that have actually done nothing but good competition. In this paper, possible consequences of such imperfect competition law enforcement on firm strategies are considered. In a simple cartel setting, it is found that the incidence of anti-competitive behavior increases in both types of enforcement errors: Type II errors decrease expected fines, while Type I errors encourage industries to collude precautionary when they face the risk of false allegations. Hence, fallible antitrust enforcement may stifle genuine competition. Moreover, when enforcement error are non-negligible, competition authorities run the risk of being over-zealous, in the sense that welfare is best served by an authority that is selective in its targeting of alleged anticompetitive acts.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 24 (2006)
Issue (Month): 6 (November)
Pages: 1267-1297

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Handle: RePEc:eee:indorg:v:24:y:2006:i:6:p:1267-1297

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Web page: http://www.elsevier.com/locate/inca/505551

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References

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Citations

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Cited by:
  1. Claudio Calcagno, 2012. "Stand-alone private antitrust damages: (how) should competition authorities react?," European Journal of Law and Economics, Springer, vol. 34(2), pages 365-389, October.
  2. Will, Birgit E. & Schmidtchen, Dieter, 2008. "Fighting cartels: some economics of council regulation (EC) 1/2003," CSLE Discussion Paper Series 2008-02, Saarland University, CSLE - Center for the Study of Law and Economics.
  3. Buccirossi, Paolo & Ciari, Lorenzo & Duso, Tomaso & Spagnolo, Giancarlo & Vitale, Cristiana, 2009. "Measuring the deterrence properties of competition policy: the Competition Policy Indexes," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 284, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Damien Neven & Hans Zenger, 2008. "Ex Post Evaluation of Enforcement: A Principal-Agent Perspective," De Economist, Springer, vol. 156(4), pages 477-490, December.
  5. Tim Reuter, 2012. "Private antitrust enforcement revisited: The role of private incentives to report evidence to the antitrust authority," Working Paper Series of the Department of Economics, University of Konstanz 2012-04, Department of Economics, University of Konstanz.
  6. Michiel Bijlsma & Roel van Elk, 2008. "Opportunistic competition law enforcement," CPB Discussion Paper 110, CPB Netherlands Bureau for Economic Policy Analysis.

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