Optimal Sequential Investigation Rules in Competition Law

Wolfgang Kerber (), Jürgen-Peter Kretschmer () and Georg von Wangenheim ()
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Wolfgang Kerber: Philipps-University Marburg
Jürgen-Peter Kretschmer: Philipps-University Marburg
Georg von Wangenheim: University of Kassel

No 200816, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: Although both in US antitrust and European competition law there is a clear evolution to a much broader application of "rule of reason" (instead of per-se rules), there is also an increasing awareness of the problems of a case-by-case approach. The "error costs approach" (minimizing the sum of welfare costs of decision errors and administrative costs) allows not only to decide between these two extremes, but also to design optimally differentiated rules (with an optimal depth of investigation) as intermediate solutions between simple per-se rules and a fullscale rule of reason. In this paper we present a decision-theoretic model that can be used as an instrument for deriving optimal rules for a sequential investigation process in competition law. Such a sequential investigation can be interpreted as a step-by-step sorting process into ever smaller subclasses of cases that help to discriminate better between pro- and anticompetitive cases. We analyze both the problem of optimal stopping of the investigation and optimal sequencing of the assessment criteria in an investigation. To illustrate, we show how a more differentiated rule on resale price maintenance could be derived after the rejection of its per-se prohibition by the US Supreme Court in the "Leegin" case 2007.

Keywords: Law Enforcement; Decision-Making; Competition Law; Antitrust Law (search for similar items in EconPapers)
JEL-codes: D81 K20 K21 K40 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2008
New Economics Papers: this item is included in nep-eec and nep-law
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Citations: View citations in EconPapers (6)

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