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Private Versus Public Antitrust Enforcement: A Strategic Analysis

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  • R. Preston McAfee
  • Hugo Mialon
  • Sue Mialon

Abstract

We compare private and public enforcement of the antitrust laws in a simple strategic model of antitrust crime and lawsuit. The model highlights the tradeoff that private firms are ex ante more likely than the government to be informed about actual antitrust violations, but are also more likely to use the antitrust laws strategically, to the disadvantage of consumers. With coupled damages (according to which the plaintiff receives what the defendant pays), if the court is sufficiently accurate, adding private to public enforcement always increases social welfare, while if the court is less accurate, it increases welfare only if the government is sufficiently inefficient in litigation. Moreover, pure private enforcement is never strictly optimal. However, in general, achieving the welfare-maximizing outcome requires private enforcement with damages that are both multiplied and decoupled.

Suggested Citation

  • R. Preston McAfee & Hugo Mialon & Sue Mialon, 2005. "Private Versus Public Antitrust Enforcement: A Strategic Analysis," Emory Economics 0523, Department of Economics, Emory University (Atlanta).
  • Handle: RePEc:emo:wp2003:0523
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    References listed on IDEAS

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    1. Baumol, William J & Ordover, Janusz A, 1985. "Use of Antitrust to Subvert Competition," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 247-265, May.
    2. Block, Michael Kent & Nold, Frederick Carl, 1981. "The Deterrent Effect of Antitrust Enforcement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 429-445, June.
    3. Besanko, David & Spulber, Daniel F, 1990. "Are Treble Damages Neutral? Sequential Equilibrium and Private Antitrust Enforcement," American Economic Review, American Economic Association, vol. 80(4), pages 870-887, September.
    4. Breit, William & Elzinga, Kenneth G, 1974. "Antitrust Enforcement and Economic Efficiency: The Uneasy Case for Treble Damages," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 329-356, October.
    5. Hugh C. Briggs III & Kathleen D. Huryn & Mark E. McBride, 1996. "Treble Damages and the Incentive to Sue and Settle," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 770-786, Winter.
    6. Breit, William & Elzinga, Kenneth G, 1985. "Private Antitrust Enforcement: The New Learning," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 405-443, May.
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    Cited by:

    1. Aldo González & Alejandro Micco, 2013. "Private vs Public Antitrust Enforcement: Evidence from Chile," Working Papers wp378, University of Chile, Department of Economics.
    2. Kryuchkova, P. & Avdasheva, S., 2012. "Public and Private Enforcement of Law under the High Risk of Type I Errors: the Russian Case," Journal of the New Economic Association, New Economic Association, vol. 15(3), pages 114-140.
    3. Schwartz, Warren F. & Wickelgren, Abraham L., 2011. "Optimal antitrust enforcement: Competitor suits, entry, and post-entry competition," Journal of Public Economics, Elsevier, vol. 95(7), pages 967-972.

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