Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, November 6, 2008

Cartel Overcharges and Optimal Cartel Fines

Posted by D. Daniel Sokol

Robert H. Lande of the University of Baltimore Law School and John Connor of Purdue University Applied and Agricultural Economics have a wonderful new work on Cartel Overcharges and Optimal Cartel Fines.

ABSTRACT: This chapter examines how high cartels raise prices on average and what this should mean for the current criminal fine levels in the U.S. Sentencing Guidelines. We utilize two distinct data sets (economic and other studies, and verdicts in final cartel cases) and find that cartels have caused average overcharges in the range of 31 to 49 percent and median overcharges in the range of 22 to 25 percent of affected commerce. We conclude that the current Sentencing Commission presumption that cartels overcharge on average by 10 percent is much too low, and the current levels of cartel penalties should be increased significantly.

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