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Cartel Penalties Under Endogenous Detection

Author

Listed:
  • Berkay Akyapi

    (University of Florida)

  • Douglas C. Turner

    (University of Florida)

Abstract

We compare the performance of cartel penalties that are proportional to a cartel’s revenue and cartel penalties that are proportional to the difference between the cartel price and the competitive price: the overcharge. Prior literature has shown that when the probability of cartel detection does not depend on the cartel price, penalties that are based on a cartel’s overcharge generate greater total surplus and consumer surplus than do penalties that are based on a cartel’s revenue. In contrast, we find that when the probability of detection depends on the cartel price, penalties that are based on revenue can generate greater total surplus and consumer surplus.

Suggested Citation

  • Berkay Akyapi & Douglas C. Turner, 2022. "Cartel Penalties Under Endogenous Detection," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(3), pages 341-371, November.
    • Handle: RePEc:kap:revind:v:61:y:2022:i:3:d:10.1007_s11151-022-09877-8
    DOI: 10.1007/s11151-022-09877-8
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    References listed on IDEAS

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