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Capture, Politics and Antitrust Effectiveness

39 Pages Posted: 20 Jul 2011 Last revised: 2 Mar 2014

Rocco Ciciretti

University of Rome II - Department of Economics and Finance

Simone Meraglia

University of Toulouse 1 - Toulouse School of Economics (TSE)

Gustavo Piga

University of Rome

Date Written: April 5, 2013

Abstract

We study the ex-ante budget devoted by a Political Principal to a Competition Authority in charge of collecting evidence on the Industry's behavior. The Industry can capture both the Principal (lobbying) for a reduced budget, and the Authority (side-contracting) so as to avoid fines. Authority's capture is costly to the Principal when side-contracting is sufficiently efficient. Collusion proofness induces high-powered incentives for the Authority, hence fostering the Authority's willingness to spend the allocated budget. For intermediate values of side-contracting's efficiency, in this moral hazard setting we fi nd that the optimal budget increases as side-contracting gets more efficient. Only when side-contracting's efficiency reaches high enough values the budget decreases, thus generating a discrepancy between the Authority's and the Principal's desired level of information gathering. Finally, a complementarity between lobbying of the Principal and capture of the Authority arises.

Keywords: Budget, Law Enforcement, Three-tier Hierarchy, Moral Hazard, Collusion-Proofness, Lobbying

JEL Classification: D72, D73, D82, K21

Suggested Citation

Ciciretti, Rocco and Meraglia, Simone and Piga, Gustavo, Capture, Politics and Antitrust Effectiveness (April 5, 2013). CEIS Working Paper No. 208. Available at SSRN: https://ssrn.com/abstract=1890504 or http://dx.doi.org/10.2139/ssrn.1890504

Rocco Ciciretti (Contact Author)

University of Rome II - Department of Economics and Finance ( email )

Via Columbia, 2
Roma, 00133
Italy
+39 06 72595925 (Phone)

HOME PAGE: http://directory.uniroma2.it/index.php/schede/getPubblicazioni/948

Simone Meraglia

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Gustavo Piga

University of Rome ( email )

Via di Tor Vergata
Rome, Lazio
Italy

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