Imperfect Competition Law Enforcement

CeNDEF Working Paper No. 04-07

35 Pages Posted: 4 Feb 2003

See all articles by Maarten Pieter Schinkel

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute

Jan Tuinstra

University of Amsterdam - Department of Quantitative Economics (KE); Tinbergen Institute

Date Written: June 2004

Abstract

Competition policy is a subject of heated debate. Antitrust authorities, seeking to battle anticompetitive behavior in complex cases to the best of their abilities, often find themselves advised by rival economic theories and disputed empirical analyses. As a consequence, there is a real possibility that authorities may occasionally err, missing true violations of competition law or finding firms liable that have indeed done nothing but good competition. In this paper, some consequences of such imperfect antitrust enforcement on firms' strategies are considered. It is found that the incidence of anti-competitive behavior increases in the enforcement error. This is due to a decrease in expected fines, but particularly also to industries colluding precautionary when they face the risk of false allegations. Moreover, the larger the enforcement error, the more likely it is that authorities are over-zealous - in the sense that welfare is better served by an antitrust authority that is lenient.

Keywords: Antitrust enforcement, imperfect information, competition policy

JEL Classification: L40, D40

Suggested Citation

Schinkel, Maarten Pieter and Tuinstra, Jan, Imperfect Competition Law Enforcement (June 2004). CeNDEF Working Paper No. 04-07, Available at SSRN: https://ssrn.com/abstract=366420 or http://dx.doi.org/10.2139/ssrn.366420

Maarten Pieter Schinkel (Contact Author)

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Jan Tuinstra

University of Amsterdam - Department of Quantitative Economics (KE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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