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The effects of cartel damage compensations

  • Hunold, Matthias
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    Damage compensation claims in case of cartels are supposed to increase deterrence, compensate losses and increase efficiency. I show that such claims can instead have adverse effects: If suppliers or buyers of cartelists are compensated in proportion to the profits lost due to the cartel, expected cartel profits can increase. Claims of downstream firms against upstream cartelists who do not monopolize the market increase consumer prices. Suppliers of cartelists can be worse off when eligible to compensation. These results apply also to abuses of dominance and call for a more careful approach towards the private enforcement of competition law.

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    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-081.

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    Date of creation: 2013
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    Handle: RePEc:zbw:zewdip:13081
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    1. Joseph E. Harrington, Jr., 2004. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 651-673, Winter.
    2. Hunold, Matthias & Röller, Lars-Hendrik & Stahl, Konrad, 2012. "Backwards integration and strategic delegation," ZEW Discussion Papers 12-022, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 337-388, May.
    4. Salant, Stephen W, 1987. "Treble Damage Awards in Private Lawsuits for Price Fixing," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1326-36, December.
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