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The Distribution of Harm in Price-Fixing Cases

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  • Boone, Jan
  • Müller, Wieland

Abstract

We consider a vertically related industry and analyze how the total harm due to a price increase upstream is distributed over downstream firms and final consumers. For this purpose, we develop a general model without making specific assumptions regarding demand, costs, or the mode of competition. We consider both the case of homogeneous and differentiated goods markets. Furthermore, we discuss data requirements and suggest explicit formulas and regression specifications that can be used to estimate the relevant terms in the harm distribution in practice, even if elevated upstream prices are rather constant over time. The latter can be achieved by considering perturbations of the demand curve. This in turn can be used to construct a supply curve for the case of imperfect competition that includes perfect competition and monopoly as special cases. Finally, we illustrate how basic intuition from the tax incidence literature carries over to the distribution of harm.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6949.

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Date of creation: Aug 2008
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Handle: RePEc:cpr:ceprdp:6949

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Keywords: abuse of a dominant position; apportionment of harm; cartel; pass on defense; supply curve; tax incidence;

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References

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Cited by:
  1. Doose, Anna Maria, 2013. "Methods for calculating cartel damages: A survey," Ilmenau Economics Discussion Papers 83, Ilmenau University of Technology, Institute of Economics.

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