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Opportunistic competition law enforcement

Author

Listed:
  • Michiel Bijlsma
  • Roel van Elk

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

We analyse the interplay between investigation policies, deterrence and desistance in a model where a competition authority monitors multiple sectors and faces a budget constraint that prevents it from deterring cartels in all sectors simultaneously. Most studies of competition law enforcement treat competition authorities as all-knowing, unwavering and benevolent. They do not behave opportunistically, do not face asymmetric information and choose their actions to optimize social welfare. In this paper, we drop one of these assumptions, and study a competition authority that can not commit to a particular investigation strategy. As a consequence, a competition authority’s decisions to investigate will be driven by the (ex-post) desistance effect instead of the (ex ante) deterrence effect of an investigation policy. The resulting opportunistic behaviour may lead to a suboptimal investigation strategy. We find that, in the absence of commitment, developing a sector specific reward scheme based on the number of captured cartels can improve welfare.

Suggested Citation

  • Michiel Bijlsma & Roel van Elk, 2008. "Opportunistic competition law enforcement," CPB Discussion Paper 110, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:110
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    References listed on IDEAS

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    More about this item

    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
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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