Wednesday, August 21, 2013
Posted by D. Daniel Sokol
Emilie Dargaud, French National Center for Scientific Research (CNRS) - Institute of Economic Theory and Analysis (GATE); Universite de la Reunion; University of Lyon 2, Andrea Mantovani, University of Bologna and Carlo Reggiani, University of Manchester discuss The Fight against Cartels: A Transatlantic Perspective.
ABSTRACT: The fight against cartels is a priority for antitrust authorities on both sides of the Atlantic. What differs between the EU and the US is not the basic toolkit for achieving deterrence, but to whom it is targeted. In the EU, pecuniary sanctions against the firm are the only instruments available to the Commission, while in the US criminal sanctions are also widely employed. The aim of this paper is to compare two different types of fines levied on managerial firms when they collude. We consider a profit based fine as opposed to a delegation based fine, with the latter targeting the manager in a more direct way. Under the assumption of revenue equivalence, we find that the delegation based fine, although distortive, is more effective in deterring cartels than the profit based one. When evaluating social welfare, a trade-off between deterrence and output distortion can arise. However, if the antitrust authority focuses on consumer surplus, then the delegation based fine is to be preferred.