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http://ssrn.com/abstract=1593549
 
 

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Antitrust Enforcement Under Endogenous Fines and Price-Dependent Detection Probabilities


Harold Houba


VU University Amsterdam - Department of Econometrics; Tinbergen Institute

Evgenia Motchenkova


VU University Amsterdam - Department of Economics; TILEC

Quan Wen


Vanderbilt University - College of Arts and Science - Department of Economics

April 21, 2010

TILEC Discussion Paper No. 2010-020

Abstract:     
We analyze the effectiveness of antitrust regulation in a repeated oligopoly model in which both fines and detection probabilities depend on the cartel price. Such fines are closer to actual guidelines than the commonly assumed fixed fines. Under a constant detection probability, we confirm the long-run neutrality result with respect to fixed fines reported in Harrington (2005) and extend his result to the case where fines are directly proportional to illegal gains. In addition, we report that the profit-maximizing cartel price lies below the monopoly price when policy design features non-constant price-dependent detection probability. This offers partial support for current practice.

Number of Pages in PDF File: 13

Keywords: Repeated Game, Cartel, Antitrust, Competition Policy

JEL Classification: C72, L41, K21

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Date posted: April 23, 2010  

Suggested Citation

Houba, Harold and Motchenkova, Evgenia and Wen, Quan, Antitrust Enforcement Under Endogenous Fines and Price-Dependent Detection Probabilities (April 21, 2010). TILEC Discussion Paper No. 2010-020. Available at SSRN: http://ssrn.com/abstract=1593549 or http://dx.doi.org/10.2139/ssrn.1593549

Contact Information

Harold E. D. Houba (Contact Author)
VU University Amsterdam - Department of Econometrics ( email )
De Boelelaan 1105
1081 HV Amsterdam
Netherlands
HOME PAGE: http://staff.feweb.vu.nl/hhouba/
Tinbergen Institute ( email )
Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
HOME PAGE: http://staff.feweb.vu.nl/hhouba/
Evgenia Motchenkova
VU University Amsterdam - Department of Economics ( email )
De Boelelaan 1105
1081 HV Amsterdam
Netherlands
TILEC ( email )
Warandelaan 2
Tilburg, 5000 LE
Netherlands
Quan Wen
Vanderbilt University - College of Arts and Science - Department of Economics ( email )
Box 1819 Station B
Nashville, TN 37235-1819
United States
615-322-0174 (Phone)
615-343-8495 (Fax)
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