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The distortive effects of antitrust fines based on revenue

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  • Vasiliki Bageri

    (Athens University of Economics and Business)

  • Yannis Katsoulacos

    ()
    (Athens University of Economics and Business)

  • Giancarlo Spagnolo

    (SITE-Stockholm School of Economics, Tor Vergata University and CEPR)

Abstract

In most jurisdictions, antitrust fines are based on affected commerce rather than on collusive profits, and in some others, caps on fines are introduced based on total firm sales rather than on affected commerce. We uncover a number of distortions that these policies generate, propose simple models to characterize their comparative static properties, and quantify them with simulations based on market data. We conclude by discussing the obvious need to depart from these distortive rules-of-thumb that appear to have the potential to substantially reduce social welfare.

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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 153.

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Length: 26
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:bog:wpaper:153

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Keywords: Antitrust; Deterrence; Fines; Law Enforcement;

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  1. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  2. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
  3. Che, Yeon-Koo & Spier, Kathryn, 2006. "Strategic Judgment Proofing," MPRA Paper 6100, University Library of Munich, Germany.
  4. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
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Cited by:
  1. Jensen, Sissel & Kvaløy, Ola & Olsen, Trond & Sørgard, Lars, 2013. "Crime and punishment: When tougher antitrust enforcement leads to higher overcharge," UiS Working Papers in Economics and Finance 2013/2, University of Stavanger.

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