Wednesday, February 15, 2012
Posted by D. Daniel Sokol
Marie-Laure Allain Ecole Polytechnique, Paris - Department of Economic Sciences, Marcel Boyer University of Montreal - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO) and Jean Pierre Ponssard Ecole Polytechnique, Paris - Laboratoire d'Econometrie discuss The Determination of Optimal Fines in Cartel Cases: Theory and Practice.
ABSTRACT: The determination of optimal fines to deter the formation or continuation of cartels is a major objective of competition policy. Several recent publications have suggested that the recent fines imposed by the European Commission are too low to be dissuasive and should therefore be substantially increased. In this paper, we question the economic reasoning underlying the models used in those articles as well as the methodology used in their application. Further, we propose a more adequate dynamic framework to assess the role of fines in deterring cartels and define a dissuasive benchmark level, from which we come to the conclusion that on average recent fines are adequately dissuasive.