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Opportunistic competition law enforcement

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Author Info
Michiel Bijlsma ()
Roel van Elk ()
Abstract

Most studies of competition law enforcement treat competition authorities as all-knowing, unwavering and benevolent. They do not behave opportunistically, do not face asymmetric information and choose their actions to optimize social welfare. In this paper, we drop one of these assumptions, and study a competition authority that can not commit to a particular investigation strategy. As a consequence, a competition authority’s decisions to investigate will be driven by the (ex-post) desistance effect instead of the (ex ante) deterrence effect of an investigation policy. The resulting opportunistic behaviour may lead to a suboptimal investigation strategy.
To analyse the interplay between investigation policies, deterrence and desistance, we study a model in which a competition authority monitors multiple sectors and faces a budget constraint that prevents it from deterring cartels in all sectors simultaneously. We find that, in the absence of commitment, developing a sector specific reward scheme based on the number of captured cartels can improve welfare.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Papers with number 110.

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Date of creation: Aug 2008
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Handle: RePEc:cpb:discus:110

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Related research
Keywords: cartels; competition law; commitment;

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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