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The Determination of Optimal Fines in Cartel Cases - The Myth of Underdeterrence

  • Marie-Laure Allain
  • Marcel Boyer
  • Rachidi Kotchoni
  • Jean-Pierre Ponssard

The determination of optimal fines to deter the formation or continuation of cartels is a major objective of competition policy. We provide an analysis of static and dynamic frameworks to characterize the restitution and deterrence properties of fines: cartel stability depends on their ability to prevent deviation by firms, while the benefit of a deviation depends on the fines to be imposed in case of detection by the antitrust authority. We show that the proper consideration of the dynamics of competition has a major impact on the determination of optimal dissuasive fines: our results suggest that a clear majority of fines imposed by the European Commission in recent years meet the deterrence objective. La détermination d'amendes optimales pour dissuader la formation ou la poursuite des cartels est au cur des politiques de concurrence. Nous définissons un cadre stratégique pour caractériser le caractère restitutif et dissuasif des amendes dans des contextes statique et dynamique : la stabilité d'un cartel dépend de sa capacité à prévenir les déviations dont la profitabilité est fonction des amendes imposées lorsque le cartel est découvert. Nous montrons que la prise en compte appropriée de la dynamique de la concurrence a un impact majeur sur la détermination des amendes dissuasives optimales : nos résultats suggèrent qu'une nette majorité des amendes infligées par la Commission Européenne ces dernières années rencontrent l'objectif de dissuasion.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2011s-34.

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Length: 38 pages
Date of creation: 01 Mar 2011
Date of revision:
Handle: RePEc:cir:cirwor:2011s-34
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  1. Connor, John M., 2005. "Price-Fixing Overcharges: Legal And Economic Evidence," 2005 Annual meeting, July 24-27, Providence, RI 19254, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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  14. Ponssard, Jean-Pierre, 1991. "Forward induction and sunk costs give average cost pricing," Games and Economic Behavior, Elsevier, vol. 3(2), pages 221-236, May.
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  22. Souam, Said, 2001. "Optimal antitrust policy under different regimes of fines," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 1-26, January.
  23. Garoupa, Nuno, 2001. "Optimal magnitude and probability of fines," European Economic Review, Elsevier, vol. 45(9), pages 1765-1771, October.
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