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Private v. public antitrust enforcement: A strategic analysis

  • McAfee, R. Preston
  • Mialon, Hugo M.
  • Mialon, Sue H.

We compare private and public enforcement of the antitrust laws in a simple strategic model of antitrust violation and lawsuit. The model highlights the tradeoff that private firms are initially more likely than the government to be informed about antitrust violations, but are also more likely to use the antitrust laws strategically, to the disadvantage of consumers. Assuming coupled private damages, if the court is sufficiently accurate, adding private enforcement to public enforcement always increases social welfare, while if the court is less accurate, it increases welfare only if the government is sufficiently inefficient in litigation. Pure private enforcement is never strictly optimal. Public enforcement can achieve the social optimum with a fee for public lawsuit that induces efficient information revelation. Private enforcement can also achieve the social optimum with private damages that are efficiently multiplied and decoupled.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 10-11 (October)
Pages: 1863-1875

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:10-11:p:1863-1875
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  9. Salant, Stephen W, 1987. "Treble Damage Awards in Private Lawsuits for Price Fixing," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1326-36, December.
  10. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
  11. Garoupa, Nuno, 1997. "A note on private enforcement and type-I error," International Review of Law and Economics, Elsevier, vol. 17(3), pages 423-429, September.
  12. Besanko, David & Spulber, Daniel F, 1990. "Are Treble Damages Neutral? Sequential Equilibrium and Private Antitrust Enforcement," American Economic Review, American Economic Association, vol. 80(4), pages 870-87, September.
  13. Baumol, William J & Ordover, Janusz A, 1985. "Use of Antitrust to Subvert Competition," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 247-65, May.
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