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Optimal Sequential Investigation Rules in Competition Law

31 Pages Posted: 12 Sep 2008  

Wolfgang Kerber

Philipps University Marburg - School of Business & Economics

Jürgen-Peter Kretschmer

Philipps University Marburg - Department of Business Administration and Economics

Georg von Wangenheim

University of Kassel

Date Written: September 2008

Abstract

Although both in US antitrust and European competition law there is a clear evolution to a much broader application of "rule of reason" (instead of per-se rules), there is also an increasing awareness of the problems of a case-by-case approach. The "error costs approach" (minimizing the sum of welfare costs of decision errors and administrative costs) allows not only to decide between these two extremes, but also to design optimally differentiated rules (with an optimal depth of investigation) as intermediate solutions between simple per-se rules and a full-scale rule of reason. In this paper we present a decision-theoretic model that can be used as an instrument for deriving optimal rules for a sequential investigation process in competition law. Such a sequential investigation can be interpreted as a step-by-step sorting process into ever smaller subclasses of cases that help to discriminate better between pro- and anticompetitive cases. We analyze both the problem of optimal stopping of the investigation and optimal sequencing of the assessment criteria in an investigation. To illustrate, we show how a more differentiated rule on resale price maintenance could be derived after the rejection of its per-se prohibition by the US Supreme Court in the "Leegin" case 2007.

Keywords: Law Enforcement, Decision-Making, Competition Law, Antitrust Law

JEL Classification: K20, K21, K40, D81

Suggested Citation

Kerber, Wolfgang and Kretschmer, Jürgen-Peter and von Wangenheim, Georg, Optimal Sequential Investigation Rules in Competition Law (September 2008). Available at SSRN: https://ssrn.com/abstract=1266267 or http://dx.doi.org/10.2139/ssrn.1266267

Wolfgang Kerber (Contact Author)

Philipps University Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany
+49 6421 2823921 (Phone)

Jürgen-Peter Kretschmer

Philipps University Marburg - Department of Business Administration and Economics ( email )

Am Plan 2
Marburg, 35032
Germany

Georg Von Wangenheim

University of Kassel ( email )

Department of Economics
D-34109 Kassel
Germany
+49-561-804 1946 (Phone)
+49-561-804 2818 (Fax)

HOME PAGE: http://www.wirtschaft.uni-kassel.de/vonWangenheim/

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