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The effects of cartel damage compensations

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  • Hunold, Matthias
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    Abstract

    Damage compensation claims in case of cartels are supposed to increase deterrence, compensate losses and increase efficiency. I show that such claims can instead have adverse effects: If suppliers or buyers of cartelists are compensated in proportion to the profits lost due to the cartel, expected cartel profits can increase. Claims of downstream firms against upstream cartelists who do not monopolize the market increase consumer prices. Suppliers of cartelists can be worse off when eligible to compensation. These results apply also to abuses of dominance and call for a more careful approach towards the private enforcement of competition law. --

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    Bibliographic Info

    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-081.

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    Date of creation: 2013
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    Handle: RePEc:zbw:zewdip:13081

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    Related research

    Keywords: competition law; cartel damage compensation; deterrence; overcharge; private enforcement; vertical relations;

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    1. Hunold, Matthias & Röller, Lars-Hendrik & Stahl, Konrad O, 2012. "Backwards Integration and Strategic Delegation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8910, C.E.P.R. Discussion Papers.
    2. Joseph E Harrington Jr, 2002. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 487, The Johns Hopkins University,Department of Economics, revised May 2003.
    3. Salant, Stephen W, 1987. "Treble Damage Awards in Private Lawsuits for Price Fixing," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(6), pages 1326-36, December.
    4. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(2), pages 337-388, May.
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