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The Determination of Optimal Fines in Cartel Cases: The Myth of UnderdeterrenceMarie-Laure AllainEcole Polytechnique, Paris - Department of Economic Sciences Marcel BoyerUniversity of Montreal - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO) Rachidi KotchoniUniversity of Montréal - Department of Economics Jean Pierre PonssardEcole Polytechnique, Paris - Laboratoire d'Econometrie March 29, 2011 CIRANO - Scientific Publication No. 2011s-34 Abstract: 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, cartels working papers seriesDate posted: August 29, 2011Suggested CitationContact Information
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