IDEAS home Printed from https://ideas.repec.org/p/brg/wpaper/0204.html
   My bibliography  Save this paper

Antitrust Policy and Collusion through Credible Covenants

Author

Listed:
  • Gianmaria Martini

    () (Department of Economics, University of Bergamo)

Abstract

This paper presents a political economy model of antitrust policy against horizontal price-fixing. The policy is implemented through discretion. In the event of collusion the public agency can enforce competition through fines and behavioral constraints. The paper shows that while fines do not constitute an incentive to investigate in the event of collusion when the policy is implemented through discretion, behavioral constraints are an effective tool in limiting collusion. However firms can strategically induce that no policy is implemented along the equilibrium path by making a credible "covenant" that little degree of collusion will be implemented today and in the future. Moreover, if firms have limited information about agency’s costs, social welfare rises up, while if the agency has limited information about production costs, the efficient cartel type increase its rents.

Suggested Citation

  • Gianmaria Martini, 2002. "Antitrust Policy and Collusion through Credible Covenants," Working Papers (-2012) 0204, University of Bergamo, Department of Economics.
  • Handle: RePEc:brg:wpaper:0204
    as

    Download full text from publisher

    File URL: http://aisberg.unibg.it/bitstream/10446/168/1/WPEco04(2002)Martini.pdf
    File Function: Version, 07-2002
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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 1326-1336, December.
    2. 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 870-887, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    credible covenants; collusion costs; antitrust policy; horizontal price-fixing; behavioral constraints;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:brg:wpaper:0204. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (University of Bergamo Library). General contact details of provider: http://edirc.repec.org/data/deberit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.