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Penalising on the basis of the severity of the offence: A sophisticated revenue-based cartel penalty

Author

Listed:
  • Yannis Katsoulacos

    (Athens University of Economics and Business, Greece)

  • Evgenia (E.) Motchenkova

    (Vrije Universiteit Amsterdam, The Netherlands, TILEC, The Netherlands; Tinbergen Institute, The Netherlands)

  • David Ulph

    (University of St Andrews, Scotland)

Abstract
In Katsoulacos et al. (2015) we examined the welfare properties of a number of monetary penalty regimes for tackling cartels, including revenue-based penalties, the most widely used regime. We showed that for a typical industry overcharge–based penalties welfare-dominate the others. However these penalties are subject to criticisms on the grounds of high implementation costs and lack of transparency/uncertainty. In this paper we propose a new sophisticated revenue-based penalty regime in which the penalty base is the revenue of the cartel but the penalty rate increases in a systematic way with the cartel overcharge. Thus, the proposed regime formalises how revenue can be used as the base while taking into account the severity of the offence. We show that this hybrid regime can replicate the desirable welfare properties of overcharge-based penalties while having relatively low levels of implementation costs and of uncertainty, concluding that the proposed penalty regime deserves very serious attention from Competition Authorities.

Suggested Citation

  • Yannis Katsoulacos & Evgenia (E.) Motchenkova & David Ulph, 2017. "Penalising on the basis of the severity of the offence: A sophisticated revenue-based cartel penalty," Tinbergen Institute Discussion Papers 17-120/VII, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20170120
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    References listed on IDEAS

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    19. repec:tin:wpaper:20150141 is not listed on IDEAS
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    Cited by:

    1. Berkay Akyapi & Douglas C. Turner, 2022. "Cartel Penalties Under Endogenous Detection," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(3), pages 341-371, November.
    2. Peter T. Dijkstra & Jacob Seifert, 2023. "Cartel Leniency and Settlements: A Joint Perspective," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(2), pages 239-273, September.
    3. Yannis Katsoulacos & Evgenia Motchenkova & David Ulph, 2023. "Measuring the effectiveness of anti‐cartel interventions in the shadow of recidivism," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2393-2407, June.

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    More about this item

    Keywords

    Antitrust Penalties; Antitrust Enforcement; Antitrust Law; Cartels;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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