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dc.contributor.authorUlph, David Tregear
dc.contributor.authorKatsoulacos, Yannis
dc.contributor.authorMotchenkova, Evgenia
dc.identifier.citationUlph , D T , Katsoulacos , Y & Motchenkova , E 2014 ' Penalizing cartels : the case for basing penalties on price overcharge ' School of Economics & Finance Discussion Paper , no. 1413 , University of St Andrews , pp. 1-46 .en
dc.identifier.otherPURE: 155824081
dc.identifier.otherPURE UUID: 0aa9b74e-c6ed-4b28-8e75-136d66bd6f58
dc.identifier.otherORCID: /0000-0003-3171-1270/work/59464531
dc.description.abstractIn this paper we set out the welfare economics based case for imposing cartel penalties on the cartel overcharge rather than on the more conventional bases of revenue or profits (illegal gains). To do this we undertake a systematic comparison of a penalty based on the cartel overcharge with three other penalty regimes: fixed penalties; penalties based on revenue, and penalties based on profits. Our analysis is the first to compare these regimes in terms of their impact on both (i) the prices charged by those cartels that do form; and (ii) the number of stable cartels that form (deterrence). We show that the class of penalties based on profits is identical to the class of fixed penalties in all welfare-relevant respects. For the other three types of penalty we show that, for those cartels that do form, penalties based on the overcharge produce lower prices than those based on profit) while penalties based on revenue produce the highest prices. Further, in conjunction with the above result, our analysis of cartel stability (and thus deterrence), shows that penalties based on the overcharge out-perform those based on profits, which in turn out-perform those based on revenue in terms of their impact on each of the following welfare criteria: (a) average overcharge; (b) average consumer surplus; (c) average total welfare.
dc.publisherUniversity of St Andrews
dc.relation.ispartofseriesSchool of Economics & Finance Discussion Paperen
dc.rights(c) the author 2014en
dc.subjectAntitrust enforcementen
dc.subjectAntitrust lawen
dc.subjectRepeated gamesen
dc.subjectHB Economic Theoryen
dc.titlePenalizing cartels : the case for basing penalties on price overchargeen
dc.typeWorking or discussion paperen
dc.contributor.institutionUniversity of St Andrews. School of Economics and Financeen

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