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Class Actions and Private Antitrust Litigation

Author

Listed:
  • Albert H. Choi
  • Kathryn E. Spier

Abstract

When firms collude and charge supracompetitive prices, consumers can bring antitrust lawsuits against the firms. When the litigation cost is low, firms accept the cost as just another cost of doing business, whereas when the cost is high, the firms lower the price to deter litigation. Class action is modeled as a mechanism that allows plaintiffs and attorneys to obtain economies of scale. We show that class actions, and the firms' incentive to block them, may or may not be socially desirable. Agency problems, settlement, fee-shifting, treble damages, public enforcement, and sustaining collusion through repeat play are also considered.

Suggested Citation

  • Albert H. Choi & Kathryn E. Spier, 2022. "Class Actions and Private Antitrust Litigation," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 131-163, August.
    • Handle: RePEc:aea:aejmic:v:14:y:2022:i:3:p:131-63
    DOI: 10.1257/mic.20200059
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K15 - Law and Economics - - Basic Areas of Law - - - Civil Law; Common Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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