Legal Principles in Antitrust Enforcement

35 Pages Posted: 13 Jul 2018  

Harold Houba

VU University Amsterdam, Department of Econometrics; VU University Amsterdam, Tinbergen Institute

Evgenia Motchenkova

VU University Amsterdam - Department of Economics; TILEC

Quan Wen

University of Washington

Date Written: July 2018

Abstract

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

Suggested Citation

Houba, Harold E. D. and Motchenkova, Evgenia and Wen, Quan, Legal Principles in Antitrust Enforcement (July 2018). The Scandinavian Journal of Economics, Vol. 120, Issue 3, pp. 859-893, 2018. Available at SSRN: https://ssrn.com/abstract=3210981 or http://dx.doi.org/10.1111/sjoe.12234

Harold E. D. Houba (Contact Author)

VU University Amsterdam, Department of Econometrics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

HOME PAGE: http://personal.vu.nl/h.e.d.houba/

VU University Amsterdam, Tinbergen Institute ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

HOME PAGE: http://personal.vu.nl/h.e.d.houba/

Evgenia Motchenkova

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Quan Wen

University of Washington ( email )

Seattle, WA 98195
United States

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