Cartel Damages Claims and the Passing-on Defence
We develop a general economic framework for computing cartel damages claims. We decompose a direct purchaser plaintiff's lost profits from the cartel in three parts: the anticompetitive price overcharge (or cost effect), the pass-on effect and the usually neglected output effect. The pass-on effect is the extent to which the plaintiff passes on the price overcharge by raising its own price, and the output effect is the lost business resulting from this passing-on. To evaluate the relative importance of the three effects, we subsequently introduce various models of imperfect competition for the plaintiff's industry. We show that an adjusted passing-on defense (i.e. accounting for the output effect) is justified under a wide variety of circumstances, provided that suficiently many of the plaintiff's rivals are affected by the cartel. We derive exact discounts to the price overcharge, which depend on relatively easy-to-observe variables, such as the pass-on rate, the number of firms, the number of firms affected by the cartel, and/or the market shares. We finally extend our framework to assess the cartel's total harm (on purchaser plaintifs and consumers), further demonstrating the crucial importance of the output effect. Our results are particularly relevant in light of the recent developments in U.S. and European antitrust policies.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Jun 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:hhs:iuiwop:556 is not listed on IDEAS
- Stennek, Johan & Verboven, Frank, 2001.
"Merger Control and Enterprise Competitiveness - Empirical Analysis and Policy Recommendations,"
Working Paper Series
556, Research Institute of Industrial Economics.
- Johan Stennek & Frank Verboven, 2006. "Merger Control and Enterprise Competitiveness: Empirical Analysis and Policy Recommendations," Chapters, in: European Merger Control, chapter 4 Edward Elgar Publishing.
- Maarten Pieter Schinkel & Jan Tuinstra & Jakob Rüggeberg, 2008.
"Illinois Walls: how barring indirect purchaser suits facilitates collusion,"
RAND Journal of Economics,
RAND Corporation, vol. 39(3), pages 683-698.
- RÃ¼ggeberg, J. & Schinkel, M.P. & Tuinstra, J., 2005. "Illinois Walls: How barring indirect purchaser suits facilitates collusion," CeNDEF Working Papers 05-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Joseph Farrell and Carl Shapiro., 1988.
"Horizontal Mergers: An Equilibrium Analysis,"
Economics Working Papers
8880, University of California at Berkeley.
- Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, March.
- Martin Hellwig, 2006. "Private Damage Claims and the Passing-On Defense in Horizontal Price-Fixing Cases: An Economist’s Perspective," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2006_22, Max Planck Institute for Research on Collective Goods.
- Werden, Gregory J & Froeb, Luke M, 1994. "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 407-26, October.
- 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).
- Corts, Kenneth S., 1998. "Conduct parameters and the measurement of market power," Journal of Econometrics, Elsevier, vol. 88(2), pages 227-250, November.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6329. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.