Open AccessAntitrust Penalties and the Implications of Empirical Evidence on Cartel Overcharges
Author(s) -
Katsoulacos Yannis,
Ulph David
Publication year - 2013
Publication title -
the economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.683
H-Index - 160
eISSN - 1468-0297
pISSN - 0013-0133
DOI - 10.1111/ecoj.12075
Subject(s) - cartel , economics , price fixing , competition (biology) , revenue , collusion , microeconomics , set (abstract data type) , empirical evidence , econometrics , computer science , accounting , ecology , philosophy , epistemology , programming language , biology
This article makes two contributions to the literature linking penalties charged by competition authorities to observed cartel price overcharges. ( i ) It extends the theory of optimal penalties by introducing new considerations regarding the timing of penalty decisions. Drawing on a new European data set to calculate these additional factors, the optimal penalty is shown to be approximately 75% of that implied by the conventional formula. ( ii ) It shows that because penalties are typically imposed on revenue, a tougher regime may increase cartel overcharges. This calls into question some recent empirical findings on this issue and the potential benefits of raising penalties.