 Settling for Coupons: Discount Contracts as Compensation and Punishment in Antitrust LawsuitsNo 5085, NBER Working Papers from National Bureau of Economic Research, Inc Abstract: A number of recent antitrust lawsuits have been settled with discount contracts in which the defendants agree in the future to sell to the plaintiffs at a discount off of the price they offer to other buyers. Economists often object to such settlements, arguing that the sellers will partially or fully offset these discounts by increasing the baseline price from which the discount is calculated. This paper shows that poorly structured discount contracts will indeed result in price increases for other buyers and that other buyers, not the sellers, are likely to bear most of the cost imposed by the settlement. Carefully formulated discount settlements, however, can avoid giving the sellers an incentive to raise prices to buyers not covered by the settlement. In such cases, the defendant bears the full cost of the settlement. I suggest that poorly structured settlements still take place because their costs are borne primarily by consumers who are not parties to these cases. JEL-codes: K41 L40 (search for similar items in EconPapers) Published as Journal of Law and Economics, October 1996, vol.39, no.2, pp.379-404. Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5085 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC. |
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