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Private v. public antitrust enforcement: A strategic analysis

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  • McAfee, R. Preston
  • Mialon, Hugo M.
  • Mialon, Sue H.

Abstract

We compare private and public enforcement of the antitrust laws in a simple strategic model of antitrust violation and lawsuit. The model highlights the tradeoff that private firms are initially more likely than the government to be informed about antitrust violations, but are also more likely to use the antitrust laws strategically, to the disadvantage of consumers. Assuming coupled private damages, if the court is sufficiently accurate, adding private enforcement to public enforcement always increases social welfare, while if the court is less accurate, it increases welfare only if the government is sufficiently inefficient in litigation. Pure private enforcement is never strictly optimal. Public enforcement can achieve the social optimum with a fee for public lawsuit that induces efficient information revelation. Private enforcement can also achieve the social optimum with private damages that are efficiently multiplied and decoupled.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 10-11 (October)
Pages: 1863-1875

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:10-11:p:1863-1875

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: L44 H11 H41 K21 D82 Private and public enforcement Antitrust laws Strategic abuse Free-riding Information revelation Social welfare;

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References

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  1. Salant, Stephen W, 1987. "Treble Damage Awards in Private Lawsuits for Price Fixing," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1326-36, December.
  2. Easterbrook, Frank H, 1985. "Detrebling Antitrust Damages," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 445-67, May.
  3. A. Mitchell Polinsky & Yeon-Koo Che, 1993. "Decoupling Liability: Optimal Incentives for Care and Litigation," NBER Working Papers 3634, National Bureau of Economic Research, Inc.
  4. R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May.
  5. Louis Kaplow, 1994. "Shifting Plaintiffs' Fees versus Increasing Damage Awards," NBER Working Papers 4263, National Bureau of Economic Research, Inc.
  6. Hugh C. Briggs III & Kathleen D. Huryn & Mark E. McBride, 1996. "Treble Damages and the Incentive to Sue and Settle," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 770-786, Winter.
  7. Baumol, William J & Ordover, Janusz A, 1985. "Use of Antitrust to Subvert Competition," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 247-65, May.
  8. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
  9. Breit, William & Elzinga, Kenneth G, 1985. "Private Antitrust Enforcement: The New Learning," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 405-43, May.
  10. Besanko, David & Spulber, Daniel F, 1990. "Are Treble Damages Neutral? Sequential Equilibrium and Private Antitrust Enforcement," American Economic Review, American Economic Association, vol. 80(4), pages 870-87, September.
  11. Block, Michael Kent & Nold, Frederick Carl, 1981. "The Deterrent Effect of Antitrust Enforcement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 429-45, June.
  12. Shavell, Steven, 1997. "The Fundamental Divergence between the Private and the Social Motive to Use the Legal System," The Journal of Legal Studies, University of Chicago Press, vol. 26(2), pages 575-612, June.
  13. Newmark, Craig M, 1988. "Is Antitrust Enforcement Effective? Comment," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1315-28, December.
  14. Garoupa, Nuno, 1997. "A note on private enforcement and type-I error," International Review of Law and Economics, Elsevier, vol. 17(3), pages 423-429, September.
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