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Antitrust Enforcement Under Endogenous Fines and Price-Dependent Detection ProbabilitiesHarold HoubaVU University Amsterdam - Department of Econometrics; Tinbergen Institute Evgenia MotchenkovaVU University Amsterdam - Department of Economics; TILEC Quan WenVanderbilt 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 working papers seriesDate posted: April 23, 2010Suggested CitationContact Information
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