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Innovation And Optimal Punishment, With Antitrust Applications

Author

Listed:
  • Keith N. Hylton
  • Haizhen Lin

Abstract

This article modifies the optimal punishment analysis by incorporating investment incentives with external benefits. In the models examined, the recommendation that the optimal penalty should internalize the marginal social harm is no longer valid. We focus on antitrust applications. In light of the benefits from innovation, the optimal policy will punish monopolizing firms more leniently than suggested in the standard static model. It may be optimal not to punish the monopolizing firm at all, or to reward the firm rather than punish it. We examine the precise balance between penalty and reward in the optimal punishment scheme.

Suggested Citation

  • Keith N. Hylton & Haizhen Lin, 2014. "Innovation And Optimal Punishment, With Antitrust Applications," Journal of Competition Law and Economics, Oxford University Press, vol. 10(1), pages 1-25.
  • Handle: RePEc:oup:jcomle:v:10:y:2014:i:1:p:1-25.
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    File URL: http://hdl.handle.net/10.1093/joclec/nht027
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    Citations

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    Cited by:

    1. Keith N. Hylton & Wendy Xu, 2020. "Error Costs, Ratio Tests, and Patent Antitrust Law," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(4), pages 563-591, June.
    2. Nie, Pu-yan & Wang, Chan & Wen, Hong-xing, 2021. "Horizontal mergers under uniform resource constraints," Journal of Retailing and Consumer Services, Elsevier, vol. 63(C).

    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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