Measuring the True Harm from Price-Fixing to Both Direct and Indirect Purchasers

Abstract

Legal actions by direct and indirect purchasers to recover damages from price-fixing, common in the United States for years, are now appearing in a number of other countries. Traditional measures of damages are flawed as measures of the true harm suffered and will often significantly understate that true harm. This paper provides measures of the degree of understatement of the true harm when traditional approaches are used and shows how the size of the error depends on the degree of competitiveness of downstream markets. The paper also provides measures of distribution of the true harm between direct and indirect purchasers.

Keywords: antitrust damages, price fixing, cartels, pass-through

JEL Classification: L41, L42, K21