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Antitrust Fines in Times of Crisis

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  • Fabra, Natalia
  • Motta, Massimo

Abstract

In a model in which firms can go bankrupt because of adverse market shocks or antitrust fines, we find that even large corporate fines may not be able to induce deterrence. Managerial penalties are thus needed. If the policy may be changed according to the state of the business cycle, then the optimal outcome can always be achieved through antitrust fines that are more severe in good times and more lenient in bad times. A time-independent policy may result in either too many bankruptcies or under-deterrence as compared to the optimal policy.

Suggested Citation

  • Fabra, Natalia & Motta, Massimo, 2013. "Antitrust Fines in Times of Crisis," CEPR Discussion Papers 9290, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9290
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    References listed on IDEAS

    as
    1. Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-536, August.
    2. Cécile Aubert, 2008. "Managerial effort incentives and market collusion," Post-Print hal-00382224, HAL.
    3. Branch, Ben, 2002. "The costs of bankruptcy: A review," International Review of Financial Analysis, Elsevier, vol. 11(1), pages 39-57.
    4. Unknown, 2010. "Comment on Antitrust Sanctions," CPI Journal, Competition Policy International, vol. 6.
    5. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-295, September.
    6. Marie-Laure Allain & Marcel Boyer & Rachidi Kotchoni & Jean-Pierre Ponssard, 2011. "The Determination of Optimal Fines in Cartel Cases The Myth of Underdeterrence," Working Papers hal-00631432, HAL.
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    Cited by:

    1. Argenton, C. & van Damme, E.E.C., 2014. "Optimal Deterrence of Illegal Behavior Under Imperfect Corporate Governance," Discussion Paper 2014-078, Tilburg University, Center for Economic Research.
    2. Angelo Castaldo & Marco Grantaliano & Nicola Faraone, 2018. "La rideterminazione giudiziale delle sanzioni antitrust: tra discrezionalità tecnica e «metodologica»," Public Finance Research Papers 33, Istituto di Economia e Finanza, DIGEF, Sapienza University of Rome.

    More about this item

    Keywords

    antitrust fines; business cycles; managing incentives;

    JEL classification:

    • K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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