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Private v. Public Antitrust Enforcement: A Strategic Analysis

33 Pages Posted: 11 Aug 2005 Last revised: 24 Jun 2012

R. Preston McAfee

Yahoo! Research Labs

Hugo M. Mialon

Emory University - Department of Economics

Sue H. Mialon

Emory University

Abstract

We compare private and public enforcement of the antitrust laws in a simple strategic model of antitrust violation and lawsuit. The model highlights the tradeoff that private firms are initially more likely than the government to be informed about antitrust violations, but are also more likely to use the antitrust laws strategically, to the disadvantage of consumers. Assuming coupled private damages, if the court is sufficiently accurate, adding private enforcement to public enforcement always increases social welfare, while if the court is less accurate, it increases welfare only if the government is sufficiently inefficient in litigation. Pure private enforcement is never strictly optimal. Public enforcement can achieve the social optimum with a fee for public lawsuit that induces efficient information revelation. Private enforcement can also achieve the social optimum with private damages that are efficiently multiplied and decoupled.

Keywords: Private and Public Enforcement, Antitrust Laws, Strategic Abuse, Free-riding, Information Revelation, Social Welfare

JEL Classification: L44, H11, H41, K21, D82

Suggested Citation

McAfee, R. Preston and Mialon, Hugo M. and Mialon, Sue H., Private v. Public Antitrust Enforcement: A Strategic Analysis. Journal of Public Economics, Forthcoming; Emory Law and Economics Research Paper No. 05-20; Emory Public Law Research Paper No. 06-4. Available at SSRN: https://ssrn.com/abstract=775245 or http://dx.doi.org/10.2139/ssrn.775245

Randolph Preston McAfee

Yahoo! Research Labs ( email )

Pasadena, CA 91103
United States

Hugo M. Mialon

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

Sue H. Mialon (Contact Author)

Emory University ( email )

Department of Economics
1602 Fishburne Dr.
Atlanta, GA 30322
United States
404-712-8169 (Phone)

HOME PAGE: http://www.suemialon.net

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