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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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    File URL: http://econstor.eu/bitstream/10419/85266/1/770550088.pdf
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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. 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.
    2. Joseph E. Harrington, Jr., 2003. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Computing in Economics and Finance 2003 26, Society for Computational Economics.
    3. Ilya Segal, 1999. "Contracting With Externalities," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 337-388, May.
    4. Hunold, Matthias & Röller, Lars-Hendrik & Stahl, Konrad, 2012. "Backwards Integration and Strategic Delegation," CEPR Discussion Papers 8910, C.E.P.R. Discussion Papers.
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