Forensic Economics: An Introduction with Special Emphasis on Price Fixing
Posted: 14 Jul 2008
Date Written: March 2008
This paper aims at explaining accepted methods of forensic analysis and how forensic economics is used in the context of competition-law enforcement. Illustrations are drawn from ancient and modern antitrust cases involving price-fixing allegations. The stated goal of antitrust laws of most nations is deterrence. Optimal deterrence requires that cartel penalties be based on multiples of economic injuries. Yet, antitrust authorities are typically reluctant to calculate fines on the basis of damages because of perceived analytical challenges or because the fact-finders lack needed economic education. However, reasonable estimates of damages can often be quickly prepared using simpler methods than econometric modeling. More often than not, alternative estimates of cartel overcharges tend to be mutually supportive. The reluctance of antitrust authorities to base fines on damages seems to indicate an abundance of caution.
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