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Delegation, Incentives and Antitrust Enforcement

Listed author(s):
  • Mohamed Jellal


  • Saïd Souam


We analyze a situation where an antitrust authority delegates to an audit inspectorthe mission of gathering the su¢cient information to condemn a cartel. The authorityhas two instruments at her disposal: rewarding the inspector with a proportion of thecollected fine or providing him with information which enhances the probability ofthe success of the prosecution. More precisely, we explore the e¢ciency consequencesof a contest between the audit inspector and the cartel. Both of them bid to winthe contest by expending e¤orts. We show that the race issue depends positively onthe financial incentives proposed to the inspector but the impact of an increase ofthe level of the fine, to be paid once an illegal agreement is detected, is ambiguous.Moreover, we show that the optimal combination of the two instruments consistsin two regimes. When the marginal cost of providing the relevant information isrelatively high, the antitrust authority equally shares the collected fine and does notprovide the inspector with any information. Conversely, when this marginal cost isrelatively small, the authority uses the two instruments. She has to provide him withthe maximum level of information consistent with winning the contest with certainty.

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Paper provided by Center for Research in Economics and Statistics in its series Working Papers with number 2004-41.

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Date of creation: 2004
Handle: RePEc:crs:wpaper:2004-41
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