Measuring the True Harm from Price-Fixing to Both Direct and Indirect Purchasers

41 Pages Posted: 7 May 2007

See all articles by Leonardo J. Basso

Leonardo J. Basso

Universidad de Chile - Civil Engineering Department

Thomas W. Ross

University of British Columbia (UBC) - Sauder School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 2007

Abstract

Legal actions by direct and indirect purchasers to recover damages as a result of price-fixing by suppliers have been common in the United States for many years and are now beginning in a number of other countries including Australia and Canada. This paper argues that traditional measures of harm used in establishing damages as a result of price-fixing may be conceptually flawed and that they will often significantly understate the true harm suffered by downstream purchasers. The largest errors are associated with circumstances in which downstream markets are less than perfectly competitive. The paper provides measures of the degree of understatement of the true harm when traditional approaches are used and shows how the size of the error depends on various model parameters that relate to the degree of competitiveness of downstream markets, the number of competitors downstream and the degree of product homogeneity downstream. The paper also provides measures of distribution of the true harm between direct and indirect purchasers.

Keywords: Cartels, Price fixing, damages, pass-through defense

JEL Classification: L42, K21, D61, L13

Suggested Citation

Basso, Leonardo J. and Ross, Thomas, Measuring the True Harm from Price-Fixing to Both Direct and Indirect Purchasers (April 2007). Available at SSRN: https://ssrn.com/abstract=984504 or http://dx.doi.org/10.2139/ssrn.984504

Leonardo J. Basso (Contact Author)

Universidad de Chile - Civil Engineering Department ( email )

Casilla 228-3
Santiago
Chile
56 2 978 4380 (Phone)
56 2 689 4206 (Fax)

HOME PAGE: http://tamarugo.cec.uchile.cl/~dicidet/leo.html

Thomas Ross

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
(604) 822-8500 (Phone)
(604) 822-8521 (Fax)

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