Legal Principles in Antitrust Enforcement
35 Pages Posted: 13 Jul 2018
Date Written: July 2018
We study antitrust enforcement that aims to channel price‐fixing incentives of cartels through setting fine schedules and detection levels. Fines obey legal principles, such as the punishment should fit the crime, proportionality, bankruptcy considerations, and minimum fines. Bankruptcy considerations limit maximum fines, ensure abnormal cartel profits, and impose a challenge for optimal antitrust enforcement. We derive the fine schedule and detection level that are constrained‐optimal under legal principles and sustainability of cartel prices. This fine schedule lies below the maximum fine, makes collusion on lower prices more attractive than on higher prices, and, hence, relates to the body of literature on marginal deterrence.
Keywords: Antitrust enforcement, antitrust law, cartel, oligopoly, repeated game
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