Antitrust Enforcement and Marginal Deterrence
AbstractAbstract: We study antitrust enforcement in which the fine must obey four legal principles: punishments should fit the crime, proportionality, bankruptcy considerations, and minimum fines. We integrate these legal principles into an infinitely-repeated oligopoly model. Bankruptcy considerations ensure abnormal cartel profits. We derive the optimal fine schedule that achieves maximal social welfare under these legal principles. This optimal fine schedule induces collusion on a lower price making it more attractive than on higher prices. Also, raising minimum fines reduces social welfare and should never be implemented. Our analysis and results relate to the marginal deterrence literature by Shavell (1992) and Wilde (1992)
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Bibliographic InfoPaper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2011-056.
Date of creation: 2011
Date of revision:
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Web page: http://www.tilburguniversity.nl/tilec/
Antitrust Policy; Antitrust Law; Oligopoly and Other Forms of Market Imperfection; Stochastic and Dynamic Games; Repeated Games.;
Other versions of this item:
- L4 - Industrial Organization - - Antitrust Issues and Policies
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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- C. Detotto & BC. McCannon & M. Vannini, 2013. "A Note on Marginal Deterrence: Evidence," Working Paper CRENoS 201310, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
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