On the Effectiveness of European Cartel Law Enforcement (Council Regulation 1/2003) – A Monte Carlo Simulation
46 Pages Posted: 12 Feb 2012
Date Written: February 9, 2012
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: Suggested Citation