Class Actions and Private Antitrust Litigation
53 Pages Posted: 7 Feb 2019 Last revised: 2 Sep 2020
Date Written: September 1, 2020
When firms collude and charge supra-competitive prices, consumers can bring antitrust lawsuits against the firms. When the litigation cost is low, firms accept the cost as just another cost of doing business, whereas when the cost is high, the firms lower the price to deter litigation. Class action is modeled as a mechanism that allows plaintiffs and attorneys to obtain economies of scale. We show that class actions, and the firms' incentive to block them, may or may not be socially desirable. Agency problems, settlement, fee-shifting, treble damages, public enforcement, and sustaining collusion through repeat play are also considered.
Keywords: Antitrust Lawsuits, Class Actions, Class Action Waivers
JEL Classification: D21, K12, K21, K41, L41
Suggested Citation: Suggested Citation