2017/01/18 by Harold Houba, Evgenia Motchenkova, Quan Wen
Decision Sciences · Economics, Econometrics and Finance · #Auction Theory and Applications #Law, Economics, and Judicial Systems #Merger and Competition Analysis
paper · doi:10.1111/sjoe.12234
openalex publication_date 2017/01/18 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
Abstract We study antitrust enforcement that aims to channel price‐fixing incentives of cartels through setting fine schedules and detection levels. Fines obey legal principles, such as the punishment should fit the crime, proportionality, bankruptcy considerations, and minimum fines. Bankruptcy considerations limit maximum fines, ensure abnormal cartel profits, and impose a challenge for optimal antitrust enforcement. We derive the fine schedule and detection level that are constrained‐optimal under legal principles and sustainability of cartel prices. This fine schedule lies below the maximum fine, makes collusion on lower prices more attractive than on higher prices, and, hence, relates to the body of literature on marginal deterrence.