The Distortive Effects of Antitrust Fines Based on Revenue
26 Pages Posted: 11 Aug 2022
Date Written: February 1, 2013
In most jurisdictions, antitrust fines are based on affected commerce rather than on collusive profits, and in some others, caps on fines are introduced based on total firm sales rather than on affected commerce. We uncover a number of distortions that these policies generate, propose simple models to characterize their comparative static properties, and quantify them with simulations based on market data. We conclude by discussing the obvious need to depart from these distortive rules-of-thumb that appear to have the potential to substantially reduce social welfare.
Keywords: Antitrust, Deterrence, Fines, Law Enforcement
JEL Classification: K21, L40
Suggested Citation: Suggested Citation