The Fight against Cartels: A Transatlantic Perspective
French National Center for Scientific Research (CNRS) - Institute of Economic Theory and Analysis (GATE); Université de la Réunion; University of Lyon 2
University of Bologna
University of Manchester
July 16, 2013
Quaderni - Working Paper DSE N° 894
The fight against cartels is a priority for antitrust authorities on both sides of the Atlantic. What differs between the EU and the US is not the basic toolkit for achieving deterrence, but to whom it is targeted. In the EU, pecuniary sanctions against the firm are the only instruments available to the Commission, while in the US criminal sanctions are also widely employed. The aim of this paper is to compare two different types of fines levied on managerial firms when they collude.
We consider a profit based fine as opposed to a delegation based fine, with the latter targeting the manager in a more direct way. Under the assumption of revenue equivalence, we find that the delegation based fine, although distortive, is more effective in deterring cartels than the profit based one. When evaluating social welfare, a trade-off between deterrence and output distortion can arise. However, if the antitrust authority focuses on consumer surplus, then the delegation based fine is to be preferred.
Number of Pages in PDF File: 26
Keywords: cartel policy, managerial firms, collusion
JEL Classification: K21, L44, K42, L21
Date posted: July 18, 2013