The Determination of Optimal Fines in Cartel Cases: The Myth of Underdeterrence
University of Montreal - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO)
Ecole Polytechnique, Paris - Department of Economic Sciences
University of Montréal - Department of Economics
Ecole Polytechnique; French National Center for Scientific Research (CNRS); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
September 22, 2011
The determination of optimal fines to deter the formation or continuation of cartels is a major objective of competition policy. We provide an analysis of static and dynamic frameworks to characterize the restitution and deterrence properties of fines: cartel stability depends on their ability to prevent deviation by firms, while 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: Cartels, Fines, Deterrence
JEL Classification: L40, L13, L41,working papers series
Date posted: January 18, 2012
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