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Fighting Cartels: Some Economics of Council Regulation (EC) 1/2003

CSLE Discussion Paper No. 2008-02

29 Pages Posted: 17 Jul 2008  

Birgit E. Will

Saarland University - Center for the Study of Law and Economics

Dieter Schmidtchen

Saarland University - Center for the Study of Law and Economics

Date Written: July 16, 2008

Abstract

This paper investigates the effectiveness of the new Council Regulation (EC) 1/2003 which replaces the mandatory notification and authorization system by a legal exception system. Effectiveness is operationalized via the two subcriteria compliance to Art. 81 EC Treaty and the probabilities of type I and type II errors committed by the European Commission. We identify four different types of Perfect Bayesian Nash Equilibria: full-compliance, zero-compliance, positive-compliance and full-deterrence. We show that the Commission can, in principle, hit the full-compliance equilibrium, where the cartelizing firms fully obey the requirements of Art 81(3) EC Treaty and both error probabilities are zero.

Keywords: competition law, cartel law enforcement, legal exception, imperfect decision making, type I error, type II error

JEL Classification: K21, K42, L40

Suggested Citation

Will, Birgit E. and Schmidtchen, Dieter, Fighting Cartels: Some Economics of Council Regulation (EC) 1/2003 (July 16, 2008). CSLE Discussion Paper No. 2008-02. Available at SSRN: https://ssrn.com/abstract=1161108 or http://dx.doi.org/10.2139/ssrn.1161108

Birgit E. Will (Contact Author)

Saarland University - Center for the Study of Law and Economics ( email )

Dieter Schmidtchen

Saarland University - Center for the Study of Law and Economics ( email )

P.O. Box 151 150
Saarbrucken 66041
Germany

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