Are antitrust fines friendly to competition? An endogenous coalition formation approach to collusive cartels

David Bartolini () and Alberto Zazzaro ()

No 19, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: A well-established result of the theory of antitrust policy is that it might be optimal to tolerate some degree of collusion among firms if the authority in charge is constrained by limited resources and imperfect information. However, few doubts are cast on the common opinion by which stricter enforcement of antitrust laws definitely makes market structure more competitive and prices lower. In this paper we challenge this presumption of effectiveness and show that the introduction of a positive (expected) antitrust fine may drive firms from partial cartels to a monopolistic cartel. Moreover, introducing uncertainty on market demand, we show that the socially optimal competition policy can call for a finite or even zero antitrust penalty even if there are no enforcement costs. We first show our results in a Cournot industry with five symmetric firms and a specilc rule of cartel formation. Then we extend the analysis to the case of N symmetric firms and a generic rule of coalition formation. Finally, we consider;the case of asymmetric firms and show that our results still hold for an industry;populated by one Stackelberg leader and two followers.

Keywords: Antitrust policy; Coalition formation; Collusive cartels (search for similar items in EconPapers)
JEL-codes: C70 L40 L41 (search for similar items in EconPapers)
Pages: 25
Date: 2009-02
New Economics Papers: this item is included in nep-bec, nep-gth, nep-ind, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://docs.dises.univpm.it/web/quaderni/pdfmofir/Mofir019.pdf First version, 2009 (application/pdf)

Related works:
Working Paper: Are Antitrust Fines Friendly to Competition? An Endogenous Coalition Formation Approach to Collusive Cartels (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:anc:wmofir:19

Access Statistics for this paper

More papers in Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Maurizio Mariotti ().