INNOVATION AND OPTIMAL PUNISHMENT, WITH ANTITRUST APPLICATIONS

Keith N. Hylton and Haizhen Lin

Journal of Competition Law and Economics, 2014, vol. 10, issue 1, 1-25

Abstract: This article modifies the optimal punishment 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 In the models examined, the recommendation that the optimal penalty should internalize the marginal social harm is no longer valid. 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.

JEL-codes: D42 K14 K21 K42 L41 L43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:jcomle:v:10:y:2014:i:1:p:1-25.

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Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

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