Innovation and Optimal Punishment, with Antitrust Applications
AbstractThis paper modifies the optimal penalty analysis by incorporating investment incentives with external benefits. In the models examined, the recommendation that the optimal penalty should internalize the marginal social harm is no longer valid as a general rule. We focus on antitrust applications. In light of the benefits from innovation, the optimal policy will punish monopolizing firms more leniently than suggested in the standard static model. It may be optimal not to punish the monopolizing firm at all, or to reward the firm rather than punish it. We examine the precise balance between penalty and reward in the optimal punishment scheme.
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Bibliographic InfoPaper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2008-09.
Date of creation: Nov 2008
Date of revision:
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More information through EDIRC
optimal law enforcement; optimal antitrust penalty; monopolization; innovation; internalization; strict liability; static penalty;
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-03 (All new papers)
- NEP-COM-2009-01-03 (Industrial Competition)
- NEP-INO-2009-01-03 (Innovation)
- NEP-LAW-2009-01-03 (Law & Economics)
- NEP-MIC-2009-01-03 (Microeconomics)
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