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Are Cartel Fines Optimal? Theory and Evidence from the European Union

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  • Marie-Laure Allain
  • Marcel Boyer

    ()

  • Rachidi Kotchoni
  • Jean-Pierre Ponssard

Abstract

Deterring the formation or continuation of cartels is a major objective of antitrust policy. We develop a dynamic framework to characterize the compensation and deterrence properties of fines, based on the fact that cartel stability depends on the ability to prevent deviation, which itself depends in part on fines imposed in case of detection and conviction. We show that the proper consideration of cartel dynamics plays a major role in determining optimal deterrent fines. Our results suggest that a majority of fines imposed by the European Commission in recent years meet the deterrence objective. Dissuader la formation ou le maintien des cartels est un objectif important de la politique antitrust. Nous développons un cadre analytique dynamique pour caractériser le niveau de dissuasion des amendes et indemnisation, fondé sur le fait que la stabilité d’un cartel dépend de la capacité à prévenir les déviations, qui elle-même dépend en partie des amendes infligées en cas de détection et de conviction. Nous montrons que la prise en compte appropriée de la dynamique des cartels joue un rôle clé dans la détermination du niveau des amendes optimales. Nos résultats suggèrent que les amendes imposées par la Commission Européenne au cours des dernières années sont dissuasives, du moins en majorité

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2013s-24.

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Date of creation: 01 Jul 2013
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Handle: RePEc:cir:cirwor:2013s-24

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Keywords: Cartels; fines; antitrust policy; Cartels; amendes; politique antitrust; concurrence;

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References

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  1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  2. Massimo Motta & Michele Polo, . "Leniency Programs and Cartel Prosecution," Working Papers 150, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Marcel Boyer & Pierre Lasserre & Michel Moreaux, 2011. "A Dynamic Duopoly Investment Game without Commitment under Uncertain Market Expansion," CIRANO Working Papers 2011s-65, CIRANO.
  4. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
  5. Boyer, M. & Dionne, G., 1982. "Riscophobie et Etalement a Moyenne Constante: Analyse et Applications," Cahiers de recherche 8229, Universite de Montreal, Departement de sciences economiques.
  6. Marcel Boyer & Tracy R. Lewis & Wei Lin Liu, 2000. "Setting standards for credible compliance and law enforcement," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 319-340, May.
  7. Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-36, August.
  8. John Thompson & David Kaserman, 2001. "After The Fall: Stock Price Movements and the Deterrent Effect of Antitrust Enforcement," Review of Industrial Organization, Springer, vol. 19(3), pages 329-334, November.
  9. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
  10. Marcel Boyer & Rachidi Kotchoni, 2012. "How Much Do Cartels Typically Overcharge?," CIRANO Working Papers 2012s-15, CIRANO.
  11. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
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