On the Effectiveness of European Cartel Law Enforcement (Council Regulation 1/2003) – A Monte Carlo Simulation

46 Pages Posted: 12 Feb 2012

See all articles by Birgit E. Will

Birgit E. Will

Saarland University - Center for the Study of Law and Economics

Martin Becker

Saarland University - Department of Economics and Statistics

Dieter Schmidtchen

Saarland University - Center for the Study of Law and Economics

Date Written: February 9, 2012

Abstract

This paper investigates the effectiveness of the legal exception system (Council Regulation (EC) 1/2003) by running a Monte Carlo simulation for different only vaguely known input parameters of the system. Effectiveness is operationalized via the two subcriteria compliance to Art. 101 TFEU, i.e. deterrence of anticompetitive behavior, and the probabilities of type I ('false positive') and type II errors ('false negative') committed by the European Commission. A simulation reflecting the uncertainty of the input parameters delivers estimates for mean compliance levels as well as the overall expectations of the error probabilities for four different types of Perfect Bayesian Nash Equilibria: full-compliance, zero-compliance, positive-compliance and full-deterrence. Although zero compliance dominates the picture, there are also considerable fractions of full and positive compliance equilibria. In addition, we investigate the effects of changing the fine and the range of the control probabilities by restricting the simulation to subsets of the parameter space.

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

JEL Classification: K21, K42, L40

Suggested Citation

Will, Birgit E. and Becker, Martin and Schmidtchen, Dieter, On the Effectiveness of European Cartel Law Enforcement (Council Regulation 1/2003) – A Monte Carlo Simulation (February 9, 2012). Available at SSRN: https://ssrn.com/abstract=2002034 or http://dx.doi.org/10.2139/ssrn.2002034

Birgit E. Will

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

Martin Becker

Saarland University - Department of Economics and Statistics ( email )

P.O. Box 151150
D-66041 Saarbruecken
Germany

Dieter Schmidtchen (Contact Author)

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

P.O. Box 151 150
Saarbrucken 66041
Germany

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