Monday, March 18, 2013
Posted by D. Daniel Sokol
Natalia Fabra, Universidad Carlos III de Madrid - Departamento de Economia and Massimo Motta, Universitat Pompeu Fabra have an interesting paper on Antitrust Fines in Times of Crisis.
ABSTRACT: In a model in which firms can go bankrupt because of adverse market shocks or antitrust fines, we find that even large corporate fines may not be able to induce deterrence. Managerial penalties are thus needed. If the policy may be changed according to the state of the business cycle, then the optimal outcome can always be achieved through antitrust fines that are more severe in good times and more lenient in bad times. A time-independent policy may result in either too many bankruptcies or under-deterrence as compared to the optimal policy.