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The fight against cartels: a transatlantic perspective

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Author Info

  • Emilie Dargaud

    ()
    (University of Lyon & CNRS, GATE)

  • Andrea Mantovani

    ()
    (University of Bologna & IEB)

  • Carlo Reggiani

    ()
    (University of Manchester)

Abstract

The fight against cartels is a priority for antitrust authorities on both sides of the Atlantic. What differs between the EU and the US is not the basic toolkit for achieving deterrence, but to whom it is targeted. In the EU, pecuniary sanctions against the firm are the only instruments available to the Commission, while in the US criminal sanctions are also widely employed. The aim of this paper is to compare two different types of fines levied on managerial firms when they collude. We consider a profit based fine as opposed to a delegation based fine, with the latter targeting the manager in a more direct way. Under the assumption of revenue equivalence, we find that the delegation based fine, although distortive, is more effective in deterring cartels than the profit based one. When evaluating social welfare, a trade-off between deterrence and output distortion can arise. However, if the antitrust authority focuses on consumer surplus, then the delegation based fine is to be preferred.

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Bibliographic Info

Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2013/25.

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Length: 31 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:ieb:wpaper:2013/6/doc2013-25

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Keywords: Cartel policy; managerial firms; collusion;

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  1. Joseph E. Harrington, Jr., 2004. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 651-673, Winter.
  2. Zhijun Chen & Patrick Rey, 2013. "On the Design of Leniency Programs," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 917 - 957.
  3. Souam, Said, 2001. "Optimal antitrust policy under different regimes of fines," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 1-26, January.
  4. Harrington, Joseph Jr. & Chen, Joe, 2006. "Cartel pricing dynamics with cost variability and endogenous buyer detection," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1185-1212, November.
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  7. Spagnolo, Giancarlo, 2004. "Divide et Impera: Optimal Leniency Programmes," CEPR Discussion Papers 4840, C.E.P.R. Discussion Papers.
  8. Motta, M. & Polo, M., 1999. "Leniency Programs and Cartel Prosecution," Economics Working Papers eco99/23, European University Institute.
  9. Besanko, David & Spulber, Daniel F, 1989. "Antitrust Enforcement under Asymmetric Information," Economic Journal, Royal Economic Society, vol. 99(396), pages 408-25, June.
  10. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  11. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
  12. Russ Pittman, 2007. "Consumer Surplus as the Appropriate Standard for Antitrust Enforcement," CPI Journal, Competition Policy International, vol. 3.
  13. Marie-Laure Allain & Marcel Boyer & Rachidi Kotchoni & Jean-Pierre Ponssard, 2011. "The Determination of Optimal Fines in Cartel Cases - The Myth of Underdeterrence," CIRANO Working Papers 2011s-34, CIRANO.
  14. Spagnolo, Giancarlo, 2004. "Managerial Incentives and Collusive Behaviour," CEPR Discussion Papers 4506, C.E.P.R. Discussion Papers.
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