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Antitrust Policy: The Impact of Revenue Penalties on Price

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  • Caroline Elliott

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  • Melinda Acutt
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    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

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    File URL: http://hdl.handle.net/10.1007/s10842-006-0002-6
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    Bibliographic Info

    Article provided by Springer in its journal Journal of Industry, Competition and Trade.

    Volume (Year): 7 (2007)
    Issue (Month): 1 (March)
    Pages: 1-8

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    Handle: RePEc:kap:jincot:v:7:y:2007:i:1:p:1-8

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    Web page: http://springerlink.metapress.com/link.asp?id=105724

    Related research

    Keywords: antitrust; regulation; revenue; profits; threats; L4; L5;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Saïd Souam, 1997. "Optimal Antitrust Policy Under Different Regimes of Fines," Working Papers 97-37, Centre de Recherche en Economie et Statistique.
    2. Arndt Christiansen and Wolfgang Kerber & Wolfgang Kerber, 2006. "Competition Policy with Optimally Differentiated Rules Instead of "Per se Rules vs. Rule of Reason"," Marburg Working Papers on Economics 200606, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. 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.
    4. 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 627-42, October.
    5. Harrington, Joseph Jr., 2003. "Some implications of antitrust laws for cartel pricing," Economics Letters, Elsevier, vol. 79(3), pages 377-383, June.
    6. 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 851-61, November.
    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. 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 227-55, May.
    9. 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.
    10. Acutt, Melinda & Elliott, Caroline & Robinson, Terry, 2001. "Credible regulatory threats," Energy Policy, Elsevier, vol. 29(11), pages 911-916, September.
    11. Zweifel, Peter & Crivelli, Luca, 1996. "Price Regulation of Drugs: Lessons from Germany," Journal of Regulatory Economics, Springer, vol. 10(3), pages 257-73, November.
    12. Glazer, Amihai & McMillan, Henry, 1992. "Pricing by the Firm under Regulatory Threat," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 1089-99, August.
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