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The effects of cartel damage compensations

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  • Hunold, Matthias

Abstract

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.

Suggested Citation

  • Hunold, Matthias, 2013. "The effects of cartel damage compensations," ZEW Discussion Papers 13-081, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:13081
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    File URL: https://www.econstor.eu/bitstream/10419/85266/1/770550088.pdf
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    References listed on IDEAS

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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. 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 1326-1336, December.
    3. Ilya Segal, 1999. "Contracting with Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 337-388.
    4. Hunold, Matthias & Röller, Lars-Hendrik & Stahl, Konrad, 2012. "Backwards Integration and Strategic Delegation," CEPR Discussion Papers 8910, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    competition law; cartel damage compensation; deterrence; overcharge; private enforcement; vertical relations;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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