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The Distortive Effects of Antitrust Fines Based on Revenue

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  • Bageri, Vasiliki
  • Katsoulacos, Yannis
  • Spagnolo, Giancarlo

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 characterise 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9518.

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Date of creation: Jun 2013
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Handle: RePEc:cpr:ceprdp:9518

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Keywords: Antitrust; Deterrence; Fines; Law Enforcement;

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References

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  1. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  2. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  3. Che, Yeon-Koo & Spier, Kathryn, 2006. "Strategic Judgment Proofing," MPRA Paper 6100, University Library of Munich, Germany.
  4. Shavell, S., 1986. "The judgment proof problem," International Review of Law and Economics, Elsevier, vol. 6(1), pages 45-58, June.
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Cited by:
  1. Jensen, Sissel & Kvaløy, Ola & Olsen, Trond E. & Sørgard, Lars, 2013. "Crime and punishment: When tougher antitrust enforcement leads to higher overcharge," Discussion Papers 2013/5, Department of Business and Management Science, Norwegian School of Economics.

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