Cartel Conduct and Antitrust Compliance with Imperfect Information about Enforcement Risk

This article models antitrust compliance training as a form of information acquisition. It finds that lower fines may benefit consumers by improving the deterrence of cartels: Sales managers who underestimate the severity of antitrust enforcement sometimes establish cartels that are actually unprofi...

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Bibliographic Details
Published inJournal of institutional and theoretical economics Vol. 174; no. 3; pp. 448 - 475
Main Author Paha, Johannes
Format Journal Article
LanguageEnglish
Published Tübingen Mohr Siebeck GmbH & Co. KG 01.09.2018
Mohr Siebeck
Subjects
Agreements
Antitrust
Antitrust laws
Cartels
Compliance
Consumers
Cooperation
Costs
Deterrence
Economic models
Efficiency
Employees
Enforcement
Fines
Law
Prevention programs
Profits
Sales
Sanctions
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Summary:This article models antitrust compliance training as a form of information acquisition. It finds that lower fines may benefit consumers by improving the deterrence of cartels: Sales managers who underestimate the severity of antitrust enforcement sometimes establish cartels that are actually unprofitable for their firms. This risk rises if an antitrust authority lowers the sanctions imposed on anticompetitive conduct. Therefore, it is a best response for firms’ compliance officers to establish antitrust training programs to mitigate this risk and prevent cartels. Fines must however not be reduced so strongly as to make anticompetitive collusion profitable.
ISSN:0932-4569
1614-0559
DOI:10.1628/093245617X14996661407776