Antitrust, Legal Standards and Investment

43 Pages Posted: 24 Feb 2013

See all articles by Giovanni Immordino

Giovanni Immordino

University of Salerno - Centre for Studies in Economics and Finance (CSEF)

Michele Polo

Bocconi University - Department of Economics

Date Written: February 5, 2013

Abstract

We study the interaction of a firm that invests in research and, if successful, undertakes a practice to exploit the innovation, and an enforcer that sets legal standards, fines and accuracy. In this setting deterrence on actions interacts with deterrence on research. When the practice increases expected welfare the enforcer commits not to intervene by choosing a more rigid per-se legality rule to boost investment, moving to a more flexible discriminating rule combined with type-I accuracy for higher probabilities of social harm. Patent and antitrust policies act as substitutes in our setting; additional room for per-se (illegality) rules emerges when fines are bounded. Our results on optimal legal standards extend from the case of (uncertain) investment in research to the case of (deterministic) investment in physical assets.

Keywords: Legal standards, accuracy, antitrust, innovative activity, enforcement

JEL Classification: D73, K21, K42, L51

Suggested Citation

Immordino, Giovanni and Polo, Michele, Antitrust, Legal Standards and Investment (February 5, 2013). Available at SSRN: https://ssrn.com/abstract=2221219 or http://dx.doi.org/10.2139/ssrn.2221219

Giovanni Immordino (Contact Author)

University of Salerno - Centre for Studies in Economics and Finance (CSEF) ( email )

84084 Fisciano, Salerno
Italy

Michele Polo

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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