Monday, July 22, 2013
Posted by D. Daniel Sokol
Vasiliki Bageri, Athens University of Economics and Business, Yannis Katsoulacos, Athens University of Economics and Business, Giancarlo Spagnolo, Stockholm School of Economics (SITE) analyze The Distortive Effects of Antitrust Fines Based on Revenue.
ABSTRACT: In most jurisdictions, antitrust fines are based on affected commerce rather than on collusive profits, and in some others, caps on fines are introduced based on total firm sales rather than on affected commerce. We uncover a number of distortions that these policies generate, propose simple models to characterise their comparative static properties, and quantify them with simulations based on market data. We conclude by discussing the obvious need to depart from these distortive rules-of-thumb that appear to have the potential to substantially reduce social welfare.