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Antitrust Policy: The Impact of Revenue Penalties on Price

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  • Caroline Elliott
  • Melinda Acutt

Abstract

The paper examines the impact on a firm’s price when it faces the possibility of an antitrust investigation and associated potential revenue penalty. As well as presenting a general model of antitrust intervention, an illustrative example reflecting the provisions of the 1998 UK Competition Act is offered, the example being developed to explore the implications of the probability of antitrust intervention and punishment increasing non-linearly as a firm’s profit rises. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Caroline Elliott & Melinda Acutt, 2007. "Antitrust Policy: The Impact of Revenue Penalties on Price," Journal of Industry, Competition and Trade, Springer, vol. 7(1), pages 1-8, March.
    • Handle: RePEc:kap:jincot:v:7:y:2007:i:1:p:1-8
    DOI: 10.1007/s10842-006-0002-6
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    References listed on IDEAS

    as
    1. Logan, John W & Masson, Robert T & Reynolds, Robert J, 1989. "Efficient Regulation with Little Information: Reality in the Limit?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 851-861, November.
    2. Joseph E. Harrington, Jr., 2004. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 651-673, Winter.
    3. 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 429-445, June.
    4. Acutt, Melinda & Elliott, Caroline & Robinson, Terry, 2001. "Credible regulatory threats," Energy Policy, Elsevier, vol. 29(11), pages 911-916, September.
    5. Souam, Said, 2001. "Optimal antitrust policy under different regimes of fines," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 1-26, January.
    6. Alvin K. Klevorick, 1973. "The Behavior of a Firm Subject to Stochastic Regulatory Review," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 57-88, Spring.
    7. Melinda Acutt & Caroline Elliott, 2001. "Threat-Based Competition Policy," European Journal of Law and Economics, Springer, vol. 11(3), pages 309-317, May.
    8. 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, February.
    9. Arndt Christiansen & Wolfgang Kerber, 2006. "Competition Policy With Optimally Differentiated Rules Instead Of “Per Se Rules Vs Rule Of Reason”," Journal of Competition Law and Economics, Oxford University Press, vol. 2(2), pages 215-244.
    10. Bawa, Vijay S & Sibley, David S, 1980. "Dynamic Behavior of a Firm Subject to Stochastic Regulatory Review," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 627-642, October.
    11. Harrington, Joseph Jr., 2003. "Some implications of antitrust laws for cartel pricing," Economics Letters, Elsevier, vol. 79(3), pages 377-383, June.
    12. Jack High (ed.), 2001. "Competition," Books, Edward Elgar Publishing, number 1751.
    13. Amihai Glazer & Henry McMillan, 1992. "Pricing by the Firm Under Regulatory Threat," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 1089-1099.
    14. Taylor, William E & Zona, J Douglas, 1997. "An Analysis of the State of Competition in Long-Distance Telephone Markets," Journal of Regulatory Economics, Springer, vol. 11(3), pages 227-255, May.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    antitrust; regulation; revenue; profits; threats; L4; L5;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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