The Determination of Optimal Fines in Cartel Cases: The Myth of Underdeterrence
Ecole Polytechnique, Paris - Department of Economic Sciences
University of Montreal - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO)
University of Montréal - Department of Economics
Jean Pierre Ponssard
Ecole Polytechnique, Paris - Laboratoire d'Econometrie
March 29, 2011
CIRANO - Scientific Publication No. 2011s-34
The determination of optimal fines to deter the formation or continuation of cartels is a major objective of competition policy. We provide a game theoretic discussion of the restitution and deterrence properties of fines static and dynamic frameworks: cartel stability depends on their ability to prevent deviation by firms and the benefit of a deviation depends on the fines to be imposed in case of detection by the antitrust authority. We show that the proper consideration of the dynamics of competition has a major impact on the determination of optimal dissuasive fines: our results suggest that a clear majority of fines imposed by the European Commission in recent years meet the deterrence objective.
Number of Pages in PDF File: 36
Keywords: Optimal fines, cartelsworking papers series
Date posted: August 29, 2011
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