Legal Principles in Antitrust Enforcement

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We study antitrust enforcement that aims to channel price-fixing incentives of cartels through setting fine schedules and detection levels. Fines obey legal principles, such as the punishment should fit the crime, proportionality, bankruptcy considerations, and minimum fines. Bankruptcy considerations limit maximum fines, ensure abnormal cartel profits, and impose a challenge for optimal antitrust enforcement. We derive the fine schedule and detection level that are constrained-optimal under legal principles and sustainability of cartel prices. This fine schedule lies below the maximum fine, makes collusion on lower prices more attractive than on higher prices, and, hence, relates to the body of literature on marginal deterrence.

Original languageEnglish
Pages (from-to)859-893
Number of pages35
JournalThe Scandinavian Journal of Economics
Volume120
Issue number3
DOIs
Publication statusPublished - Jul 2018

Keywords

  • Antitrust enforcement
  • antitrust law
  • cartel
  • oligopoly
  • repeated game

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