Innovation and Optimal Punishment, with Antitrust Applications

Keith N. Hylton and Haizhen Lin ()
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Keith N. Hylton: Boston University Law School

No 2008-09, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: This paper modifies the optimal penalty analysis by incorporating investment incentives with external benefits. In the models examined, the recommendation that the optimal penalty should internalize the marginal social harm is no longer valid as a general rule. We focus on antitrust applications. In light of the benefits from innovation, the optimal policy will punish monopolizing firms more leniently than suggested in the standard static model. It may be optimal not to punish the monopolizing firm at all, or to reward the firm rather than punish it. We examine the precise balance between penalty and reward in the optimal punishment scheme.

Keywords: optimal law enforcement; optimal antitrust penalty; monopolization; innovation; internalization; strict liability; static penalty (search for similar items in EconPapers)
JEL-codes: D42 K14 K21 K42 L41 L43 (search for similar items in EconPapers)
Date: 2008-11
New Economics Papers: this item is included in nep-com, nep-ino, nep-law and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:iuk:wpaper:2008-09

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